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Reporting & leadership
Capital allocation
Deciding where the business's cash goes — reinvestment, debt repayment, reserves, distributions — by comparing the return on each use against the cost of capital and the risk.
Owned by: VP / CFOTest band: VP / CFO
In practice
This is the CFO's real job. Every dollar has an alternative use; the question is always "compared to what".
The kind of thing the test asks
- Free cash flow is $500k. Options: repay 8% debt, a project with a 15% expected return, or hold cash. The best allocation is…
- A CFO's core job is best described as…
More in reporting & leadership
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