Question

Selected data taken from a recent year’s financial statements of trading card company Topps Company, Inc. are as follows (in millions). Net sales $326.7 Current liabilities, beginning of year 41.1 Current liabilities, end of year 62.4 Net cash provided by operating activities 10.4 Total liabilities, beginning of year 65.2 Total liabilities, end of year 73.2 Capital expenditures 3.7 Cash dividends 6.2 Compute the free cash flow

Answer 1

Answer:

$0.5 million

Explanation:

Given: Net sales= $326.7 million

           Current liabilities, beginning of year $41.1 million

          Current liabilities, end of year $62.4 million

          Net cash provided by operating activities $10.4 million

          Total liabilities, beginning of year $65.2 million

          Total liabilities, end of year $73.2 million

         Capital expenditures $3.7 million

          Cash dividends $6.2 million

Now, compute free cash flow.

Formula: Free cash flow= $(\textrm{ Net cash provided by operating activities - capital expenditure - cash dividend})$

Free cash flow= $(10.4 - 3.7 - 6.2) = 10.4 - 9.9$

∴ Free cash flow= $0.5 million

Free cash flow of firm is useful to know the profitability of company excluding all non cash expense from firm´s income statement.