Question

or the year ending December​ 31, 2018, Sparks Electric expects net cash provided by operations of $ 327 comma 000​, net cash used by investing activities of $ 138 comma 000​, and net cash provided by financing activities of $ 49 comma 000. Sparks plans to spend $ 251 comma 000 to add a warehouse for its operations and pays $ 31 comma 000 in cash dividends. What is the amount of free cash​ flow?

Answer 1

Answer:

Free cash flow = 0

Explanation:

Provided details, we have

Net cash provided by Operations = $327,000

Net cash used in investing activities = ($138,000)

Net cash provided by financing activities = $49,000

Cash flow for the year = $238,000

Less; Amount for dividend = $31,000

= $207,000

Further it provides to acquire warehouse for $251,000

That will not let anything left as free cash flow, rather it will be in negative.

= $207,000 - $251,000 = - $44,000

Since after all these there will be no cash for shareholders the free cash flow is 0. As for dividend, even that will not be payable as the value in negative amount is much more than dividend.

Free cash flow is the amount available for distribution to shareholder's after meeting all the capital needs of the company.

Thus here, it is zero.