How to Answer: What is the difference between cash flow as presented on the Statement of Cash Flows and Free Cash Flow?
Advice and answer examples written specifically for a Finance Manager job interview.
23. What is the difference between cash flow as presented on the Statement of Cash Flows and Free Cash Flow?
How to Answer
This is a technical question that tests whether you know the difference between two common measures of cash flow. The main difference is Free Cash Flow excludes cash from financing activities (loan proceeds, dividends paid) while the Statement of Cash Flows includes those inflows and outflows.
Written by Brian Schuchart on January 1st, 2021
Answer Example
"Free Cash Flow is typically defined as cash that is available for financing and dividends to shareholders. Therefore, free cash flow excludes financing activities such as loan proceeds and repayments and dividends to shareholders, while the statement of cash flows includes those items in the calculation of cash flow generated."
Written by Brian Schuchart on January 1st, 2021
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