A company has cash from operating activities of \$800,000, capital expenditures of \$200,000, and dividends of \$100,000. What is the impact of capital expenditures and dividends on free cash flow?

• A. They reduce free cash flow by \$100,000.
• B. They reduce free cash flow by \$300,000.
• C. They have no impact on free cash flow.
• D. They increase free cash flow by \$300,000.

Answer: (B)