The correct answer is A. EBIT = Interest.
FL stands for Free Cash Flow. It is the cash flow that is available to the company after taking into account all of its operating expenses, interest payments, and taxes.
EBIT stands for Earnings Before Interest and Taxes. It is the profit that a company makes before taking into account interest and taxes.
If EBIT is equal to interest, then the company is making just enough profit to cover its interest payments. In this case, there will be no free cash flow, as all of the company’s profit will be used to pay interest.
The other options are incorrect because they do not take into account interest payments. If EBIT is zero, then the company is making no profit. If EBIT is equal to fixed costs, then the company is making just enough profit to cover its fixed costs. If EBIT is equal to preferred dividends, then the company is making just enough profit to cover its preferred dividends. In all of these cases, there will be no free cash flow, as all of the company’s profit will be used to cover its expenses.