In Free Cash Flow projections, which of the following is subtracted to account for capital expenditures?

In Free Cash Flow projections, capital expenditures (CapEx) represent the investments made in fixed assets that are necessary for a company to maintain or expand its current operations. To determine Free Cash Flow, these capital expenditures must be subtracted from cash generated from operations.

When calculating Free Cash Flow, the formula often follows the structure of Cash from Operations minus Capital Expenditures. Here, capital expenditures reflect the cash outflows used for acquiring or maintaining fixed assets, which directly impacts the future cash generation capabilities of the business. This means that when projecting Free Cash Flows, subtracting fixed asset investments is essential to provide an accurate representation of the cash available to equity holders after necessary investments have been considered.

Other options do not relate directly to capital expenditures in the context of Free Cash Flow calculation. Net income reflects profits without accounting for required investments in infrastructure. Taxes are deductions from income and do not specifically relate to the costs of maintaining fixed assets. Cash from operations is the starting point for calculating Free Cash Flow but is not the deduction made for capital expenditures. Therefore, identifying fixed asset investments as the amount subtracted clarifies the determination of available cash flow after making critical investments in long-term assets.