(a)
Concept introduction:
Cash Flow adequacy ratio measures if
TO CALCULATE
Free Cash Flow and cash flow adequacy ratio for Ditka and McMahon.
(b)
Concept introduction:
Free Cash flow basically represents the cash that company is able to generate after spending the money required to maintain or expand the asset base.
Cash Flow adequacy ratio measures if cash flows generated from operating activities are sufficient to pay off the fixed asset purchases.
TO EXPLAIN
The meaning of the values derived from the above step.
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Cornerstones of Financial Accounting
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- The statement of cash flo ws helps analysts evaluate all but which of the following? Multiple Cholce The amount of debt relative to equlty. Source of cash used for debt repayments. Source of cash used to finance investing activities. Differences between net income and net operating cash flow. Source of cash used for plant expansion.arrow_forwardWhich of the three types of activities reported on the statement of cash flows is the mostimportant to evaluate when analyzing a company’s long-term survival?a. Operating activitiesb. Investing activitiesc. Financing activitiesd. Noncash investing and financing activitiesarrow_forwardUsing the following answer keys, you are to identify in which activity each of the transactions is classified and its effect on cash flows. Cash Flow Classification.using the capital letter only: .Operating Activity L.Investing Activity F.Financing Activity OL.Operating and Investing Activity • .Noncash Transaction Effect on Cash Flows.using the capital letter only: • L.Increase D.Decrease N.No Effect Transaction Cash Flow Classification Effect on Cash Flows Declared and paid a cash dividend. Sold short-term trading securities at a gain. Retired fully depreciated equipment. Sold a machine at a loss. Purchased long-term available-for- sale securities. Decreased accounts receivable. Purchased 90-day Treasury bill. Incurred a net loss. Declared and issued a stock dividend. Sold treasury stock.arrow_forward
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