(a)Quality of earnings ratio (b)Capital expenditures ratio (c)Free cash flow LAPORTE INC.Statement of Cash Flows (Partial)For the Year Ended December 31, 2020Cash flows from operating activities:Net earningsAdd (deduct) items not affecting cash:Decrease in accounts payableDecrease in income tax payableDecrease in merchandise inventoryDepreciation expenseGain on sale of investmentsIncrease in accounts receivableLoss on sale of equipmentNet cash used for operating activities17(14)(1)710(6)(20)2(5) LAPORTE INC.Statement of Cash Flows (Partial)For the Year Ended December 31, 2020Cash flows from investing activities:Purchase of equipmentSale of equipmentSale of long-term investmentNet cash flow from investing activities$$(35)214834

The question is based on the concept of Cash Flow Statement. Cash Flow Statement is the statement…

For the Year Ended December 31, 2020 Cash flows from operating activities: Net earnings Add (deduct) items not affecting cash: Decrease in accounts payable Decrease in income tax payable Decrease in merchandise inventory Depreciation expense Gain on sale of investments $ 17 (14) (1) ► 7 10 (6)

For the Year Ended December 31, 2020 Cash flows from operating activities: Net earnings Add (deduct) items not affecting cash: Decrease in accounts payable Decrease in income tax payable Decrease in merchandise inventory Depreciation expense Gain on sale of investments $ 17 (14) (1) ► 7 10 (6)

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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Question

(a)	Quality of earnings ratio
(b)	Capital expenditures ratio
(c)	Free cash flow

LAPORTE INC.
Statement of Cash Flows (Partial)
For the Year Ended December 31, 2020
Cash flows from operating activities:
Net earnings
Add (deduct) items not affecting cash:
Decrease in accounts payable
Decrease in income tax payable
Decrease in merchandise inventory
Depreciation expense
Gain on sale of investments
Increase in accounts receivable
Loss on sale of equipment
Net cash used for operating activities
17
(14)
(1)
7
10
(6)
(20)
2
(5)

LAPORTE INC.
Statement of Cash Flows (Partial)
For the Year Ended December 31, 2020
Cash flows from investing activities:
Purchase of equipment
Sale of equipment
Sale of long-term investment
Net cash flow from investing activities
$
$
(35)
21
48
34

Definition Definition Cash that is left over after a company has paid for its operating and capital expenses. Unlike net income or earnings, free cash flow excludes non-cash expenses of the income statement and includes the expenditures on equipment and assets. Free cash flow also helps potential shareholders to evaluate how quickly the company can pay interest and dividends.

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