Question

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

	2014	2013
Cash	16	19
Short-term investments	7	65
Accounts receivable	368	318
Inventories	555	420
Property, plant & equipment (net)	925	874
Accounts payable	45	33
Short-term debt	98	61
Accrued liabilities	147	131
Long-term debt	659	585
Common stock	130	130
Retained earnings	767	714
Net revenue	3143	2855
Depreciation expense	113	93
Interest	89	63
Taxes	80	81
Net income	252	123

(Round to the nearest whole dollar)

Answer 1

Free CasH Flow for 2014 = Net Income + Non Cash Expense(depreciation) - Increase in Working Capital - Capital Expenditure (Capex)

=$(252+113-62-51) = $252

Hint = Working Capital = Current Assets - Current Liabilities where Current Assets are Cash, Short-term investments, Accounts Receivable and Inventories

Current Liabilities are Accounts Payable, short-term debt and Accrued liabilities

2013 Working Capital = 19+65+318+420-33-61-131 =$597

2014 Working Capital = 16+7+368+555-45-98-147 = $659

Therefore, Increase in Working Capital =$659-$597 =$62

Capital Expenditure = 2014 Property, plant & equipment- 2013 Property, plant & equipment =$(925-874) =$51