Comparative financial statement data for Carmono Company follow: For this year,

Question

Comparative financial statement data for Carmono Company follow:

For this year, the company reported net income as follows:

This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year.

Compute Carmono’s free cash flow for this year.

This Year Last Year Assets Cash $ 8.50 $ 16.00 Accounts receivable 54.00 47.00 Inventory 97.50 84.40 Total current assets 160.00 147.40 Property, plant, and equipment 237.00 198.00 Less accumulated depreciation 47.20 35.40 Net property, plant, and equipment 189.80 162.60 Total assets $ 349.80 $ 310.00 Liabilities and Stockholders’ Equity Accounts payable $ 58.50 $ 48.00 Common stock 126.00 97.00 Retained earnings 165.30 165.00 Total liabilities and stockholders’ equity $ 349.80 $ 310.00

Explanation / Answer

Statement of Cash Flows For the Year Ended December 31 Cash Flows from Operating Activities: Net income 20 Adjustments to reconcile net income to Net cash provided by operating activities Depreciation expense 11.8 Increase in Accounts receivable -7 Increase in inventory -13.1 Increase in accounts payable 10.5 2.2 Net cash provided by operating activities 22.2 Cash Flows from Investing Activities: Purchase of Plant Assets -39 Net Cash Provided by Investing Activities -39 Cash Flows from Financing Activities Payment of Cash Dividends -19.7 Issuance of Capital Stock 29 Net Cash Used by Financing Activities 9.3 Net Increase in Cash -7.5 Cash at Beginning of Period 16 Cash at End of Period 8.5 Free cash flow for this year=22.2-39-19.7= -36.5

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