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Basic Question 4 of 5
A high cash flow from operations to capital expenditures ratio signals that a firm ______.
B. has high financial flexibility
C. is a capital-intensive firm
D. has difficulty adding to capacity via capital expenditures without the need to borrow funds
A. has low financial leverage
B. has high financial flexibility
C. is a capital-intensive firm
D. has difficulty adding to capacity via capital expenditures without the need to borrow funds
User Contributed Comments 6
| User | Comment |
|---|---|
| danlan2 | Is C right? |
| MasterD | C is not necessarily correct. A company with say 5 Million CFO with a 1M Capital Expenditures has a higher CFO/Cap than a company with 5 Million CFO and a 4 Million Cap Ex but clearly a lower capital-intensive firm. |
| bmeisner | This question suggest the opposite of C. High cash flow to capex ratio suggests that significant capex is not needed for operations. |
| schweitzdm | Thanks bmeisner |
| praj24 | Cash flow - think liquidity |
| khalifa92 | lol i read the question as high cash outflow from operation to capital expenditure, still confused too xD. |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
calculate and interpret financial ratios used in credit analysis
CFA® 2024 Level I Curriculum, Volume 4, Module 16.