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1. What can operating managers do to increase free cash flow?
Improve Net Income since Free Cash Flow changes in proportion with net income.
Improve operational efficiency and productivity to increase cash from operating activities.
Since free cash flow refers to the interest rate on debt, there is nothing operating managers can do about it.
2. What financial measure indicates whether the asset base has been created through debt or through equity?
Return on Total Assets.
Return on Equity.
Debt to equity ratio.
3. What is the implication for a company’s Balance Sheet when the Debt Ratio is greater than 1?
The company paid back more debt during the preceding year than it borrowed.
The company has more debt than assets and the owner’s equity is negative.
The company’s debt is greater than owner’s equity.
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