Question

Correctly answer is part of question #6

6. Free cash flow Accounting statements represent a company's earnings, but this is not the real cash that a company generates Earnings data can be manipulated and can be deceiving. Thus, corporate decision makers and security analysts focus on the free cash flow that a firm generates to analyze the company's real cash position. which of the following statements best describes free cash flow? The excess cash generated by revenues less all operating expenses O The cash flow available for distribution to all investors after the company has made all investments in fixed assets and working capital necessary to sustain a firm's ongoing operations Suppose you are the only owner of a chain of coffee shops near universities. Your current cafés are doing well, but you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial performance

Answer 1

1)	Which of the following statements best describes free cash flow?
	*The cash flow available for distribution to all investors……………………….
	……………………………………….firm's ongoing operations.
2)	EBIT	135000
	Tax at 35%	47250
	NOPAT	87750
	Add: Depreciation	25714
	OCF	113464
	Less:
	Net capital expenditure	0
	Increase in NWC = 20250+10800-10800-6750 =	13500
	FCF	99964
	Based on your evaluation you have $99,964 in free cash flow.
3)	Can a company have negative free cash flow:
	Yes.