Free cash flow : Free cash flow is defined as an evaluation of financial performance of a company. It shows the cash which is generated after paying on capital expenditures. Such cash is used for production, expansion, development of new products, and acquisitions. The following formula is used to calculate free cash flow. Free cash flow = ( Net cash provided by operating activities − Cash payments planned for investments in long-term assets ) To Determine: M’s free cash flow for both years.

Question

Free Cash Flow Burkhalter Inc. reported the following on the company's statement of cash flows in Year 2 and Year 1: Year 2 Year 1 Net cash flows from operating activities $385,000 $367,000 Net cash flows used for investing activities (293,000) (330,000) Net cash flows used for financing activities (83,000) (55,000) Seventy percent of the net cash flows used for investing activities was used to replace existing capacity. a. Determine Burkhalter's free cash flow for both years. Year 2 $fill in the blank 1 Year 1 $fill in the blank 2 b. Has Burkhalter's free cash flow improved or declined from Year 1 to Year 2?Improved

Answer 1

Question

Chapter 16, Problem 16.8APE

a.

To determine

Free cash flow:

Free cash flow is defined as an evaluation of financial performance of a company. It shows the cash which is generated after paying on capital expenditures. Such cash is used for production, expansion, development of new products, and acquisitions.

The following formula is used to calculate free cash flow.

Free cash flow = (Net cash provided by operating activities−Cash payments planned for investments in long-term assets)

To Determine: M’s free cash flow for both years.

b.

To determine

To Explain: Whether free cash flow has improved or declined from Year 1 to Year 2.

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