Apex Company prepared the statement of cash flows shown below:Apex CompanyStatement of Cash Flows—Indirect MethodOperating activities: Net income $ 40,800Adjustments to convert net income to cash basis: Depreciation$ 20,900 Increase in accounts receivable(61,300) Increase in inventory(25,300) Decrease in prepaid expenses10,000 Increase in accounts payable53,700 Decrease in accrued liabilities(11,200) Increase in income taxes payable4,300(8,900)Net cash provided by (used in) operating activities 31,900Investing activities: Proceeds from the sale of equipment14,900 Loan to Thomas Company(40,400) Additions to plant and equipment(120,000) Net cash provided by (used in) investing activities (145,500)Financing activities: Increase in bonds payable89,400 Increase in common stock40,000 Cash dividends(28,700) Net cash provided by (used in) financing activities 100,700Net decrease in cash and cash equivalents (12,900)Beginning cash and cash equivalents 28,100Ending cash and cash equivalents $ 15,200Required:Compute Apex Company’s free cash flow.

Answered: Apex Company prepared the statement of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Apex Company prepared the statement of cash flows shown below:

Apex Company
Statement of Cash Flows—Indirect Method
Operating activities:
Net income		$ 40,800
Adjustments to convert net income to cash basis:
Depreciation	$ 20,900
Increase in accounts receivable	(61,300)
Increase in inventory	(25,300)
Decrease in prepaid expenses	10,000
Increase in accounts payable	53,700
Decrease in accrued liabilities	(11,200)
Increase in income taxes payable	4,300	(8,900)
Net cash provided by (used in) operating activities		31,900
Investing activities:
Proceeds from the sale of equipment	14,900
Loan to Thomas Company	(40,400)
Additions to plant and equipment	(120,000)
Net cash provided by (used in) investing activities		(145,500)
Financing activities:
Increase in bonds payable	89,400
Increase in common stock	40,000
Cash dividends	(28,700)
Net cash provided by (used in) financing activities		100,700
Net decrease in cash and cash equivalents		(12,900)
Beginning cash and cash equivalents		28,100
Ending cash and cash equivalents		$ 15,200

Required:

Compute Apex Company’s free cash flow.

Expert Solution

Step 1: Introduction to Free Cash Flow

Free Cash Flow (FCF) is a financial metric used to assess a company's financial performance and health. It represents the amount of cash generated by a company's operations that is available to be distributed to investors, creditors, and reinvested in the business after accounting for capital expenditures (CapEx) needed to maintain or expand its asset base.

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