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In: Finance

Baxter International Inc. free cash flow from 2016 was a positive $2,606,000,000 and in 2017 was...

Baxter International Inc. free cash flow from 2016 was a positive $2,606,000,000 and in 2017 was a negative $2,348,000,000. What inference can you draw from the companies' free cash flow for both years. Please explain your rationale for your answer.

Exxon Mobil Corp. free cash flow from 2016 was a positive $64,138,000,000 and in 2017 was a positive $52,533,000,000. What inference can you draw from the companies' free cash flow for both years. Please explain your rationale for your answer.

Solutions

Expert Solution

The free cash flow is the amount of money that the business generates or consumes. If it generates money, it has positive free cash flow. Money generated by the business is available to the owners of the business. It can be distributed to the owners as dividends or reinvested in the business. If the business consumes money, it has negative free cash flow. This represents a shortfall in cash, and the managers need to make up this shortfall either by getting money from the owners or by getting it from lenders who loan the money to the company.

Baxter international inc generates money in 2016 because its free cash flow is positive whereas the negative free cash flow in 2017 indicates that the business is consuming money.

Exxon mobil corp has positive free cash flow in 2016 and 2017 which indicates that the business generates money in both these years . The money is available to the owners which can be used to be distributed as dividends or the money can be reinvested into the business.


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