Question

Use the data below to compute 2014 FCF (Free Cash Flow):

	2014	2013
Cash	16	17
Short-term investments	5	67
Accounts receivable	365	319
Inventories	555	415
Property, plant & equipment (net)	925	874
Accounts payable	47	30
Short-term debt	95	64
Accrued liabilities	148	130
Long-term debt	658	582
Common stock	130	130
Retained earnings	770	711
Net revenue	3147	2850
Depreciation expense	110	94
Interest	92	63
Taxes	82	81
Net income	256	123

(Round to the nearest whole dollar)

Answer 1

Ans : Free cash flow = Net Income + Non cash expense - Increase in working capital - Capital expenditure

= 256 + 110 - 151 - 51 (Refer note 1 and note2 for increase in working capital and capex)

= $ 164

Note: 1 Increase in working capital

	2014	2013	Change
Accounts receivable	$       365	$       319	$         46
Inventories	$       555	$       415	$       140
Less:Accounts payable	$         47	$         30	$         17
Less:Accrued liabilities	$       148	$       130	$         18
Increase in working capital			$      151

Note 2:

Capital expenditure

	2014	2013	Change
PPE	$       925	$       874	$         51