Based on your evaluation you havein free cash flow.Free cash flow can be used for various reasons, including distributing it to stockholders and debtholders. Which of the following is not a use of freecash flow?O Acquiring operating assetsO Repurchasing common stock Accounting statements represent a company's earnings, but this is not the real cash that a company generates. Earnings data can be manipulated andcan be deceiving. Thus, corporate decision makers and security analysts focus on the free cash flow that a firm generates to analyze the company'sreal cash position.Which of the following statements best describes free cash flow?O The amount of a firm's available cash used to write off capital expenditures and depreciationO The amount of a firm's available cash that can be used without harming operations or the ability to produce future cash flowsSuppose you are the only owner of a chain of coffee shops near universities. Your current cafés are doing well, but you are interested in starting afine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides youwith the following data on your current financial performance:Financial update as of June 15• Your existing business generates $135,000 in EBIT.• The corporate tax rate applicable to your business is 25%.• The depreciation expense reported in the financial statements is $25,714.• You don't need to spend any money for new equipment in your existing cafés; however, you do need $20,250 of additional cash.●• You also need to purchase $10,800 in additional supplies-such as tableclothes and napkins, and more formal tableware-on credit.. It is also estimated that your accruals, including taxes and wages payable, will increase by $6,750.

Free Cash Flow It is a gauge of a business's health and financial performance. A corporation is…

Answered: Based on your evaluation you have in…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter10: Forecasting Financial Statement

Section: Chapter Questions

Problem 6QE

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What is the Objective: Useful Information about Net Cash Inflows to the Company, and why is it important?
Is it possible for a company to have significant net income in the same time period that net cash flows are negative? Explain.
Accounting statements represent a company’s earnings, but this is not the real cash that a company generates. Earnings data can be manipulated and can be deceiving. Thus, corporate decision makers and security analysts focus on the free cash flow that a firm generates to analyze the company’s real cash position. Which of the following statements best describes free cash flow? The excess cash generated by revenues less all operating expenses Based on your evaluation you have (103,379,107,069,111,989,152,579) in free cash flow. Can a company have negative free cash flow? No Yes The cash flow available for distribution to all investors after the company has made all investments in fixed assets and working capital necessary to sustain a firm’s ongoing operations Suppose you are the only owner of a chain of coffee shops near universities. Your current cafés are doing well, but you are interested in starting a fine-dining restaurant. You…
. Free cash flow Accounting statements represent a company’s earnings, but this is not the real cash that a company generates. Earnings data can be manipulated and can be deceiving. Thus, corporate decision makers and security analysts focus on the free cash flow that a firm generates to analyze the company’s real cash position. Which of the following statements best describes free cash flow? Residual cash flow after taking into account operating cash flows, including fixed-asset acquisitions, asset sales, and working-capital expenditures Cash flows generated by operating the business Suppose you are the only owner of a chain of coffee shops near universities. Your current cafés are doing well, but you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial performance: Financial update…
Assume you are the financial officer of a major firm. The president of the firm has just stated that she wishes to reduce the firm's investment in current assets since those assets provide little, if any, return to the firm. How would you respond to this statement? As long as a firm maintains a positive cash balance, why is it essential to review the firm's cash flows
Answer the following questions for the directors: True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans? True or false, the financing activities section of the statement of cash flows reflects the cash flows that affect current assets and liabilities? True or false, buying property, plant and equipment would be considered a cash outflow from financing? True or false, the financing section of the statement of cash flows reflects transactions in the equity accounts and the long-term liability accounts? True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an…
Answer the following questions for the directors: True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans? True or false, the financing activities section of the statement of cash flows reflects the cash flows that affect current assets and liabilities? True or false, buying property, plant and equipment would be considered a cash outflow from financing? True or false, the financing section of the statement of cash flows reflects transactions in the equity accounts and the long-term liability accounts? True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an…
Which of the following is not typically a characteristic experienced by a company during the introductory phase of the corporate life cycle? Cash from financing is positive. Cash used in operations will exceed cash generated by operations. Considerable cash will be used to purchase productive assets. Cash from investing is positive.
Answer the following questions for the directors: True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans?
Discuss the factors that are likely to influence the desired level of cash of a company Outline the advantages and disadvantages of using short term debt, as opposed to long term debt, in the financing of working capital Why cash flows rather than profits are most desirable in financial management? Explain the term “agency relationships” and discuss the conflicts that might exist in therelationship between’i) Shareholder and managersii) Shareholders and creditors
Is it possible that a company with a very high net income has a negative balance of cash flows from operating activities? Explain your answer. please answer in detail
True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans?

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Based on your evaluation you have in free cash flow. Free cash flow can be used for various reasons, including distributing it to stockholders and debtholders. Which of the following is not a use of free cash flow? O Acquiring operating assets O Repurchasing common stock