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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. |
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Learning Outcome Statements
calculate and interpret financial ratios used in credit analysis
CFA® 2025 Level I Curriculum, Volume 4, Module 16.