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6. Free cash flow Accounting statements represent a company's carnings, but thys is not the reat cath that a company generates. farnings dats cas be runuedinist a sf can be decelving. Thus, corpoirate decivon makers and security analysts focus en the free caah flew that a firm gnneratas ta aruarze thie sarminity teal cash position. Which of the following statements best describes free cash fow? The excess aash generated by revenues less all octratsng expenses necessafy to sustain a firm's ongoing operations Suppose you are the only owner of a chain of coffee shops near universities. your curent cafts art doing weil, but pou are intarested in atartrig a with the following data on your current financial performance: Financial update as of June 15 - Your existing business generates $75,000 in E8IT. - The corporate tax rate applicable to your business is 25%. - The depreciation expense reported in the financial statements is $14,286. - You dony need to spend any money for new equipment in your existing cafes, homever, you do feed 111,250 ef ade tona can - You also need to purchase $6,000 in add tional supplies-such as tableclothes and napiins, and more formal tablessin-on creat. - It is also estimated thot your accruals, including toxes and wages payable, will incroase by 13,750 . Suppose you are the only owner of a chain of coffee shops near universities. Your current cafes are doing well, but you are inte fine-dining restaurant, You decide to use the cash generated from your existing business to enter into a new business: Your acc with the following data on your current financial performance: Financial update as of June 15 - Your existing business generates $75,000 in EBIT. - The corporate tax rate applicable to your business is 25%. - The depreciation expense reported in the financial statements is $14,286. - You don't need to spend any money for new equipment in your existing cafes; however, you do need $11,250 of addition - You also need to purchase $6,000 in additional supplies-5uch as tableclothes and napkins, and more formal tableware - It is also estimated that your accruals, including taxes and wages payable, will increase by $3,750. Based on your evaluation you have in free cash flow. Can a company have negative free cash flow? Yes

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