BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 16, Problem 16.26EX
Textbook Problem

Free cash flow

Lovato Motors Inc. has cash flows from operating activities of $720,000. Cash flows used for investments in property, plant, and equipment totaled $440,000, of which 85% of this investment was used to replace existing capacity.

Determine the free cash flow for Lovato Motors Inc.

Expert Solution
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, acquisitions, payment of dividends, and repayment of debts.

The following formula is used to calculate free cash flow.

Free ash flow = (Net cash provided by operating activites - Cash payment planned for investments in long-term investments - Cash dividends )

To Determine: The free cash flow for L Motors Incorporation.

Explanation of Solution

Free cash flow is the balance of cash from operating activities. This balance remains after the payment of “long-term assets, dividends, and repayment of debts to creditors”.

It signifies the amount of cash which leftover in the business after meeting the above expenditures in acquisition and expansion of business.

Working note:

Calculate the amount of cash paid for maintaining property, plant and equipment:

Cash paid for maintainingproperty, plant and equipment

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Chapter 16 Solutions

Accounting
Show all chapter solutions
Ch. 16 - Classifying cash flows Identify whether each of...Ch. 16 - Classifying cash flows Identify whether each of...Ch. 16 - Adjustments to net incomeindirect method Ripley...Ch. 16 - Adjustments to net incomeindirect method Ya Wen...Ch. 16 - Changes in current operating assets and...Ch. 16 - Changes in current operating assets and...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Land transactions on the statement of cash flows...Ch. 16 - Land transactions on the statement of cash flows...Ch. 16 - Cash received from customersdirect method Sales...Ch. 16 - Cash received from customersdirect method Sales...Ch. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Free cash flow McMahon Inc. reported the following...Ch. 16 - Free cash flow Dillin Inc. reported the following...Ch. 16 - Cash flows from operating activities On its income...Ch. 16 - Effect of transactions on cash flows State the...Ch. 16 - Classifying cash flows Identify the type of cash...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Determining cash payments to stockholders The...Ch. 16 - Reporting changes in equipment on statement of...Ch. 16 - Reporting changes in equipment on statement of...Ch. 16 - Reporting land transactions on statement of cash...Ch. 16 - Reporting stockholders equity items on statement...Ch. 16 - Reporting land acquisition for cash and mortgage...Ch. 16 - Reporting issuance and retirement of longterm debt...Ch. 16 - Determining net income from net cash flow from...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Cash flows from operating activitiesdirect method...Ch. 16 - Cash paid for merchandise purchases The cost of...Ch. 16 - Determining selected amounts for cash flows from...Ch. 16 - Cash flows from operating activitiesdirect method...Ch. 16 - Cash flows from operating activitiesdirect method....Ch. 16 - Free cash flow Sweeter Enterprises Inc. has cash...Ch. 16 - Free cash flow The financial statement for Nike,...Ch. 16 - Free cash flow Lovato Motors Inc. has cash flows...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsdirect method The...Ch. 16 - Statement of cash flowsdirect method applied to...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsdirect method The...Ch. 16 - Statement of cash flowsdirect method applied to PR...Ch. 16 - Ethics in Action Lucas Hunter, president of...Ch. 16 - Communication Tidewater Inc., a retailer, provided...Ch. 16 - Using the statement of cash flows You are...Ch. 16 - Dillip Lachgar is the president and majority...

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