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Accounting statements represent a company's earnings, but this is not the real cash that a company generates. Earnings data can be manipulated and can be deceiving. Thus, corporate decision makers and security analysts focus on the free cash flow that a firm generates to analyze the company's real cash position. Which of the following statements best describes a firm's free cash flow? The amount of a firm's available cash that can be used without harming operations or the ability to produce future cash flows The amount of a firm's available cash used to write off capital expenditures and depreciation Suppose you are the only owner of a chain of coffee shops near universities. Your current cafs are doing well, but you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial performance: Suppose you are the only owner of a chain of coffee shops near universities. Your current cafs are doing well, but you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial performance: Financial update as of June 15 Your existing business generates $147,000 in EBIT. The corporate tax rate applicable to your business is 35%. The depreciation expense reported in the financial statements is $28,000. You don't need to spend any money for new equipment in your existing cafs; however, you do need $22,050 of additional cash. You also need to purchase $11,760 in additional supplies-such as cloth tablecloths and napkins, and more formal tableware-on credit. It is also estimated that your accruals, including taxes and wages payable, will increase by $7,350. Based on your evaluation you have in free cash flow. Can a company have negative free cash flow? Yes O No

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