Free Cash Flow to Equity (FCFE) is a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt repayment are taken into account.

Let's go through each statement:

a. The company is not profitable in an economic sense - If a company is not generating enough revenue to cover its operating expenses and capital expenditures, it could result in negative FCFE.

b. The company has made sizeable investments in fixed and working capital - Large investments in fixed assets (like property or equipment) or increases in working capital (like inventory or accounts receivable) can also lead to negative FCFE, as these investments reduce the amount of cash available to shareholders.

c. Repayments of existing loan far exceed new borrowings - If a company is paying down a significant amount of debt, this could also result in negative FCFE. This is because these debt repayments reduce the amount of cash available to shareholders.

So, the correct answer is:

e. All of the above

All of these factors can potentially lead to negative Free Cash Flow to Equity.

Question

Free Cash Flow to Equity (FCFE) is a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt repayment are taken into account.

Let's go through each statement:

a. The company is not profitable in an economic sense - If a company is not generating enough revenue to cover its operating expenses and capital expenditures, it could result in negative FCFE.

b. The company has made sizeable investments in fixed and working capital - Large investments in fixed assets (like property or equipment) or increases in working capital (like inventory or accounts receivable) can also lead to negative FCFE, as these investments reduce the amount of cash available to shareholders.

c. Repayments of existing loan far exceed new borrowings - If a company is paying down a significant amount of debt, this could also result in negative FCFE. This is because these debt repayments reduce the amount of cash available to shareholders.

So, the correct answer is:

e. All of the above

All of these factors can potentially lead to negative Free Cash Flow to Equity.

Knowee AI · Accepted Answer

Free Cash Flow to Equity (FCFE) is a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt repayment are taken into account.

Let's go through each statement:

a. The company is not profitable in an economic sense - If a company is not generating enough revenue to cover its operating expenses and capital expenditures, it could result in negative FCFE.

b. The company has made sizeable investments in fixed and working capital - Large investments in fixed assets (like property or equipment) or increases in working capital (like inventory or accounts receivable) can also lead to negative FCFE, as these investments reduce the amount of cash available to shareholders.

c. Repayments of existing loan far exceed new borrowings - If a company is paying down a significant amount of debt, this could also result in negative FCFE. This is because these debt repayments reduce the amount of cash available to shareholders.

So, the correct answer is:

e. All of the above

All of these factors can potentially lead to negative Free Cash Flow to Equity.

Why might a companys free cash flow to equity (FCFE) be negative? 0 a. The company is not profitable in an economic sense 0 b. The company has made sizeable investments in fixed and working capital 0 c Repayments of existing loan far exceed new borrowings 0 d. B and C only 0 e. All of the above

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