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free cash flow

An analyst prepared reformulated balance sheets for the yeas 2007 and 2006 as follows (in millions of dollars) :

________________________2007_________________2006_______

Operating assets $640 $590
Financial assets $250 $110
----- ------
$890 $700
----- -----
----- -----
Finncial debt 170 130
Operating liabilities 20 30
Common equity 700 540
---- ----
$890 $700
---- ---- --- ----

The firm rported $100 million in comprehensive income for 2007 and no net financial income or expense.

a) Calculate the free cash flow for 2007? ( answer must be $40 million )

b) How was the free cash flow disposed of? ( open-ended answer )

c) How can a firm with financial assets and financial liabilities have zero net financial income or expense ? ( open-ended answer )

Solution Preview

Dear Student,

Thank you for using BM.
Below are my answers.

ANSWERS
Question a
Comprehensive income: 100 million
Less: Decrease in operating liabilities: (10 million)
Increase in operating ...

Solution Summary

This solution calculates free cash flow.

$2.19