The correct answer is: B. free cash flow.
Net investment in operating capital is subtracted from net operating profit after taxes to calculate free cash flow. Free cash flow is the amount of cash that a company has available after it has paid for its operating expenses, capital expenditures, and debt service. It is a measure of a company’s financial health and its ability to generate cash.
Relevant inflows are the cash that a company expects to receive from its operations. Relevant outflows are the cash that a company expects to pay out for its operations. Cash outlay is the amount of cash that a company spends on a particular project or investment.
Here is a more detailed explanation of each option:
- A. Relevant inflows are the cash that a company expects to receive from its operations. These include cash from sales, cash from investments, and cash from loans.
- B. Free cash flow is the amount of cash that a company has available after it has paid for its operating expenses, capital expenditures, and debt service. It is a measure of a company’s financial health and its ability to generate cash.
- C. Relevant outflows are the cash that a company expects to pay out for its operations. These include cash for expenses, cash for capital expenditures, and cash for debt service.
- D. Cash outlay is the amount of cash that a company spends on a particular project or investment.
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