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Compare free cash flow to net increase in cash on the statement of cash flows. Is...

Compare free cash flow to net increase in cash on the statement of cash flows.

Is it better to have a positive free cash flow or a negative free cash flow? Why?

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Answer #1

Free cash flow: is what is left to be distributed to the stakeholders after deducting all the expenses from the revenue.

Free cash flow = operating cash flow - capital expenditures

Net increase in cash on cash flow statement : The net increase or decrease of cash , is what is left after all the cash from the operating,investing and financing activities is adjusted with the cash flow at the beginning to get the net cash flows at the end.

It is always better to have a positive cash flow, having a negative cash flow means that the cash flow that is left after paying for all the capital expenditure is negative which means that the business is making heavy capital expenditures. A company with negative free cash flow indicates an inability to generate enough cash to support the business.

It is always good to have a positive cash flow.

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