Question

Income Statement
Operating income
Sale	4.56
Less: operating ezpenses	-2.75
Less: depreciation	-0.88
Non operating income
Interest income	0.087
Dividend income	0.124
Less: interest expense	0.0744
Less: dividend paid	0.13
Total income (0.93+0.006)	0.9366
Tax Expense	0.1967
Profit after tax	0.7399
Nos of shares	1
Earning per share (130/100)	$1.3

Using the information above, what is McFarsen’s Free Cash Flow for 2017 assuming that Gross Fixed Assets was $2.4 million at the end of 2016, and $2.7 million at the end of 2017. Also assume that cash, accounts receivable and inventory were $0.35 million, $0.76 million and $0.47 million, respectively, at the end of 2016, and $0.46 million, $0.68 million and $0.54 million, respectively, at the end of 2017. Accounts payable and accruals were $0.46 million and $0.37 million, respectively, at the end of 2016, and $0.38 million and $0.32 million, respectively, at the end of 2017. What are the potential uses of a company’s free cash flow?  

Answer 1

Cash flows from operating activities
Net Income		0.7399
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation expenses	0.88
Dividend paid	0.13
Decrease in Accounts receivable	0.08
Increase in Inventory	-0.19
Decrease in Accounts Payable	-0.08
Decrease in accurals	-0.05
		0.77
Net cash from operating activities		1.5099
Free cash flow for 2017
Net cash from operating activities-Capital expenditure
1.5099-(2.4-2.7)	1.2099
The use of free cash flow is
1) It can be used to pay dividend
2) it can be used for business expansion
3) It can use to repay debts
4) It can be used for buyback of shares etc
If any doubt please comment