Directions Answer the following questions on a separate docu

Directions: Answer the following questions on a separate document. Explain how you reached the answer, or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above.

B. Using the two stocks you identified, determine the free cash flow from 2013 & 2014. What inference can you draw from the companies’ free cash flow?

Solution

The free cash flow can be calculated by deducting capital expenditures from cash from operations. It is the cash which company generates after reinvestment of noncurrent capital assets.

The two companies chosen are Ford Motor Company and General Motor Company.

The Free Cash Flow of Ford Motor Company of 2013 was $3.8 billion and 2014 was $7.0 billion.

It specifies that company is generating enough cash and the same has increased over one year which means that the company has better position in terms of cash.

The Free Cash Flow of General Motor Company of 2013 was $5.1 billion and 2014 was -$1.3 billion.

The company’s health benefits when the free cash flow rises. The negative free cash flow is not a bad indicator. It shows that company might be making significant investments which could earn higher returns.