Exercise 126 Prepare a Statement of Cash Flows Free Cash Flo

Exercise 12-6 Prepare a Statement of Cash Flows; Free Cash Flow [LO12-1, LO12-2, LO12-3] Comparative financial statement data for Carmono Company follow This Year Last Year Assets Cash Accounts receivable Inventory 10.00 $ 19.00 60.00 53.00 05.00 92.20 Total current assets 175.00 164.20 Property, plant, and equipment 246.00 204.00 49.60 37.20 Less accumulated depreciation Net property, plant, and equipment 196.40 166.80 Total assets $ 371.40 $331.00 Liabilities and Stockholders\' Equity Accounts payable Common stock Retained earnings S 63.00 51.00 138.00 106.00 170.40 174.00 Total liabilities and stockholders\' equity $371.40 $331.00

Solution

Carmano company

Statement of cash flows

2)Free cash flow (FCF) is a measure of a company\'s financial performance,calculated as operating cash flow minus capital expenditures. FCF represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base.

Operating activities:
Net Income	20
Adjustments to convert Net income to cash basis:
(+)Depreciation	12.4
(-)Increase in stock	7
(-)Increase in inventory	12.8
(+)Increase in Accounts payable	12
(-) Decrease in retained earnings	3.6
Net cash flow from operating activities	+1
Investing activities:
(-)Purchase of PPE	42
Net cash flow from Investing activities	-42
Financing activities:
Increase in common stock	32
Net cash flow from Financing activities	+32
Net decrease in cash	-9
(+)Cash balance at the begining	19
Net cash balance at the end	10