Question

Total current assets              480               Depreciation and amortization   50

Total current liabilities           450                  Investment                  100

Net operation profit after taxes     270           Total common equity          300

How do i find the operating cash flow and the free cash flow with these provided number and accounts?

Answer 1

Operating Cash Flow = Operating Income + Depreciation – Taxes + Change in Working Capital.

= 270+50+30

= 350

Or operating cash flow = earnings after tax+ depreciation and amortization + changes in working capital

Free cash flow:

= Net income + Depreciation/Amortization – Change in Working Capital – Capital Expenditure

= 270+50-30-100

=190

Changes in working capital= current assets- current liabilities, 480-450 = 30.

Capital expenditure means Capital expenditures (CapEx) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.

Capital expenditure is often used to undertake new projects or investments by a company.

Therefore given investments treated as long term, and it is included in balance sheet, so we can assume as capital expenditure

EBIT(1-tax rate)= earnings after tax or profit after tax...