Chapter 16, Problem P16.42BPGB

To determine

Concept Introduction:

Cash Flow statement:

The Cash flow statement shows the movement of cash during a particular period. The Cash flows are categorized into three categories as follows:

• Cash flows from operating activities
• Cash Flows from investing activities
• Cash flows from financing activities

(Note: Cash flows from operating activities can be prepared using direct or indirect method)

Free Cash Flow:

Free cash flow is used to determine the financial performance of a company. Frees cash flows is surplus money that is saved after spending on Capital assets and expenses. It is calculated with the help of following formula:

$\text{Free cash flow = Operating cash flows – Capital Expenditure}$

Requirement-1:

To prepare: The Cash flow statement of Morris Education Supply for the year ended Dec. 31, 2016 using the indirect method

To determine

Requirement-2:

To evaluate: The Cash flows of Morris Education Supply for the year ended Dec. 31, 2016

To determine

Requirement-3:

To evaluate: The Expected Free Cash flows of Morris Education Supply for the year ended Dec. 31, 2017