Chapter 4, Problem 4.6P

a)

Summary Introduction

To calculate: Net operating profits after tax.

Introduction:

Net income is the excess amount of revenue which arises after deducting all the expenses of a company.

b)

Summary Introduction

To calculate: Operating cash flow.

Introduction:

Operating cash flow:

It is the measurement of the amount of cash that a firm generates by its normal business operation. This helps to determine whether the firm can generate an adequate positive cash flow for the maintenance and growth of its operation or it needs any external financing.

c)

Summary Introduction

To calculate: Free cash flow.

Introduction:

Cash flow:

It is the inflow and outflow of cash and capital in a business where a positive cash flow implies a rise in the liquid assets, return on capital to the shareholders, and more; whereas a negative cash flow indicates a decrease in the firm’s liquid assets.

d)

Summary Introduction

To discuss: The interpretation of the estimated cash flows, and compare and contrast them.

Introduction:

Cash flow:

It is the inflow and outflow of cash and capital in a business where a positive cash flow implies a rise in the liquid assets, return on capital to the shareholders, and more; whereas a negative cash flow indicates a decrease in the firm’s liquid assets.