# The following shows excerpts from financial information relating to Aspen Company and Bergamot Company. Compute the following for both companies. Compare your results. A. free cash flow B. cash flows to sales ratio C. cash flows to assets ratio

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

#### Solutions

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 16, Problem 12PA
Textbook Problem
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## The following shows excerpts from financial information relating to Aspen Company and Bergamot Company.Compute the following for both companies. Compare your results.A. free cash flowB. cash flows to sales ratioC. cash flows to assets ratio

To determine

(a)

Introduction:

Free cash flow is generated by deducting capital expenditure and cash dividend payments from cash flow from operating activities.

To compare:

The free cash flow of both companies.

### Explanation of Solution

Calculation of free cash flow of both companies:

 A B Particulars Amount ($) Amount ($) Amount ($) Amount ($) Cash flow from operating activities 320,000 486,900 Less: Capital Expenditure costs
To determine

(b)

Introduction:

Free cash flows:

Free cash flow is generated by deducting capital expenditure and cash dividend payments from cash flow from operating activities

Sales revenue:

The total amount of cash generated by selling of goods & services is called sales revenue.

To compare:

The cash flows to sales ratio of both companies.

To determine

(c)

Introduction:

Free cash flows:

Free cash flow is generated by deducting capital expenditure and cash dividend payments from cash flow from operating activities

Total assets:

Assets are referred as anything in possession of business which has an economic value, and which can benefit the business for a period of 1 or more years. Total assets are the total amount of owned asset by a business.

To compare:

The cash flows to assets ratio of both companies.

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