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Mini Case: "Financial Statement and Cash Flow - Essay Example
Author : jenagoyette
Finance & Accounting
Pages 6 (1506 words)
Mini Case: Financial Statement and Cash Flow Analysis By ID Code+ University name Date PART A: 1. Calculate Jaedan’s free cash flow. Free cash flow is useful in determining the company’s flow of cash…
Free cash flow= cash from operations- capital expenditures The free cash flow represents the financial ability of the company; that is its ability to engage in investment activities that goes beyond the planned investment activities (Walter, Harrison, & Horngren, 2003). However, noting that many investment activities of companies are quite significant, caution should be taken when implementing any investment activity that falls above the budgeted investments. Cash from operations is also referred to as earnings before interest net of depreciation and amortization. Therefore; Free cash flow= 17,237,000+800,000 =18,037,000 2. Calculate Jaedan’s liquidity. A company’s liquidity ratios are used in determining the organizations capacity to meet its short-term obligations when they fall due. Liquidity ratios are important to the investors when conducting fundamental analysis of the firm. High values imply that a firm has adequate assets compared to liabilities and should therefore can pay off short-term debts with ease. Current ratio helps to assess the company’s current assets ability to pay-off current liabilities. The liquidity ratios include: Current ratio= Current Assets/ Current liabilities =15,066,000/4,342,000 =3.5 Industry current ratio= 3.26 Quick ratio also is also known as acid test ratio. It is more stringent and refined than current ratio. The ratio uses assets that are highly liquid. ...
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