Which statement about operating expenses is true regarding free cash flow?

Free cash flow is a crucial metric in financial analysis as it provides insights into how much cash a company generates after accounting for capital expenditures necessary to maintain or expand its asset base. One critical component of calculating free cash flow is the consideration of changes in working capital, which represents the difference between current assets and current liabilities.

When calculating free cash flow, net income is adjusted for non-cash items and changes in working capital. This inclusion is important because it reflects the cash that is tied up in the operations of a business and can fluctuate based on factors such as inventory management, accounts receivable, and accounts payable. These shifts can significantly impact the liquidity and financial health of an organization.

By factoring in changes in working capital, analysts can get a clearer picture of the cash available for distribution to investors, debt repayment, or reinvestment in growth initiatives. Understanding this concept is vital for evaluating a company's operational efficiency and ensuring that it has the necessary cash flow to meet its obligations.

In contrast, the other options do not accurately capture the nuanced relationship between operating expenses and free cash flow. For instance, free cash flow does not exclude all operating expenses, nor does it only consider fixed operating expenses. Additionally, free cash flow is indeed related to capital expenditures,