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Which of the following items affect free cash flows to debt and equity holders? Which affect free cash flows to equity alone? Explain why and how.
All answers assume a tax rate > 0.
An increase in accounts receivable
A decrease in gross margins
An increase in property, plant, equipment
An increase in inventory
Interest expense
An increase in prepaid expenses
An increase in notes payable to the bank

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// The given points affect 'free cash flows', I would like to tell you a short description of these points which you can alter, modify or expand ,as per your requirement. //

All answers assume a tax rate > 0.

An increase in accounts receivable - decrease in cash flow to debt and equity ...

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Dell analysis of cash provided by operating activities, fred cash flow, dividends

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Case 7-1
Analysis of Cash Flows

Refer to the annual report of Dell in Appendix A:

a. Explain how the following items create differences between Dell's earnings from continuing operations and its net cash provided by operating activities:
(1) Depreciation and amortization
(2) Change in deferred taxes
(3) Decrease in receivables
(4) Decrease in inventories
b. Explain why net income is much less than cash from operations in 2005.
c. Calculate Dell's free cash flows for each of the past three years.
d. How has Dell used its free cash flows during the past three years?
e. How much cash has Dell returned to shareholders during each of the past three years and in total?

ANSWER CHECK: (c) 2005=$4,785

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