1. Dividend policy and free cash flow Aa Aa Companies, especially established corporations, set up a policy that is often called a distribution policy or a payout policy. These policies specify what companies intend to do with their profits and the free cash flow (FCF). The objective is to create a distribution policy that increases the value of the firm and maximizes shareholder wealth. Which of the following help firms determine the actual implementation of their distribution policy? Check all that apply. The method of payment to shareholders-cash or stocks The level of payout to shareholders that is sustainable in the future The level of reinvestment in Treasury bills and bonds The level of retained earnings to maintain A firm can make any form of distribution to its shareholders using the free cash flow that it generates. The underlying objective is to maximize shareholder wealth by increasing the firm's value. Any use of the FCF that has a negative impact on the firm's value is not considered a good use of the FCF. Which of the following uses is considered a good use of free cash flow? Choose the best answer. Issue new stock Repurchase stock Theoretically, there are some traditional ways of using FCF. A company invests 15% of its FCF in marketable securities. This makes it difficult for the firm to access its funds to support its growth. This statement is false because marketable securities easily liquidated