Final answer:
Free cash flow (FCF) is described as the total disputable cash flow available to a company after subtracting capital expenditures from operating cash flow. It indicates the amount of cash available for dividends, stock buybacks, or new investments. FCF is a key indicator of financial health for companies.
Step-by-step explanation:
Free cash flow is better described as c. total disputable cash flow. Free cash flow (FCF) refers to the cash that a company generates through its operations, after subtracting any capital expenditures necessary to maintain or expand its asset base. This measure is useful because it shows how much cash a company has available for purposes such as paying dividends, buying back stock, or investing in new projects.
Free cash flow is calculated by taking the operating cash flow and subtracting capital expenditures. It does not include non-cash expenses, which are expenditures recorded on the income statement but do not involve actual cash outflow, nor does it directly relate to dividend and interest payments, which are considered uses of free cash flow. Free cash flow is also distinct from fixed asset investments, which are just a part of what is subtracted from operating cash flow to arrive at FCF.