Question

A company has an operating income of $100 million, depreciation of $15 million, an asset sale of $50 million, a capital expenditure of $10 million, and an increase in net working capital of $10 million. Calculate this company’s free cash flow for the year.

Answer 1

Answer:

145 millons free cash flow for the year

Explanation:

100 operating income

+ 15 depreciation (this expense do not involve cash, so they add up cash)

+50 long term asset sales (more cash in form of currency)

-10 capital expenditure (cash used purchase, mantaing or improve their assets)

-10 investment in working capital (we use it to adquire assets or pay liabilities)

-----

145 millons free cash flow for the year