14-12 What is the difference between net cash provided by operating activities and free cash flow?

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Jarrod RobelLv2

25 May 2018

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Related questions

Operating Activities

How do you determine cash flow provided by (used in) operating activities using the indirect method?

How is cash flow provided by (used in) operating activities determined using the direct method? How is this different from the indirect method?

Investing Activities

How do you determine cash flow provided by (used in) investing activities?

Financing Activities

How do you determine cash flow provided by (used in) financing activities?

What is the formula to calculate change in cash flow?

What are the steps to prepare the cash flow statement?

Explain the difference between the direct and indirect method.

What are some considerations that should be made when evaluating cash flow?

EXERCISE 14-3 Calculating Free Cash Flow (L014-3] Apex Company prepared the statement of cash flows for the current year that is shown below: i $ 40,000 (6,000 34,000 Apex Company Statement of Cash Flows-Indirect Method Operating activities: Net income ................................ Adjustments to convert net income to cash basis: Depreciation ...... $ 22,000 Increase in accounts receivable .......... (60,000) Increase in inventory .... (25,000) Decrease in prepaid expenses .......... 9,000 Increase in accounts payable ............... 55,000 Decrease in accrued liabilities .......... (12,000) Increase in income taxes payable ......... 5,000 Net cash provided by operating activities ......... Investing activities: Proceeds from the sale of equipment ............. 14,000 Loan to Thomas Company ........ (40,000) Additions to plant and equipment ................ (110,000 Net cash used for investing activities ......... Financing activities: Increase in bonds payable .. 90,000 Increase in common stock ........... 40,000 Cash dividends (30,000) Net cash provided by financing activities. Net decrease in cash ..... Beginning cash balance........... Ending cash balance ...................... (136,000) 100,000 (2,000) 27,000 $ 25,000 Required: Compute Apex Company's free cash flow for the current year.

XYZ Company reported the following on their statement of cash flows in 2016 and 2017:

2016 2017

Net Cash flow from operating activities $353,000 $374,000

Net Cash flow used for investing activities (287,000) (276,000)

Net cash flow used for financing activities (54,000) (46,000)

Eighty percent of the net cash flow used for investing activities was used to replace existing capacity.

a) Calculate their free cash flow for 2016 and 2017.

b) Has their free cash flow improved or declined from 2016 to 2017?