Final answer:
The Free Cash Flow to the Firm (FCF) is linked with both the investment and financing decisions of the company. It measures the cash flow available to the firm after investments and operating expenses. This includes both the cash flow from operations and financing activities.
Step-by-step explanation:
The Free Cash Flow to the Firm (FCF) is linked with both the investment and financing decisions of the company.
FCF measures the cash flow that is available to the firm after it has made all necessary investments in assets and paid for all operating expenses. It includes both the cash flow from operations as well as the cash flow from financing activities.
For example, if a company invests in new equipment and finances this investment by borrowing money, the FCF would take into account both the investment in the equipment and the financing decision to borrow the money.