Q27Q.
Question
Net income for the year for Tanizaki, Inc. was \(750,000, but the statement of cash flows reports that net cash provided by operating activities was \)860,000. Tanizaki also reported capital expenditures of \(75,000 and paid dividends in the amount of \)30,000. Compute Tanizaki’s free cash flow
Step-by-Step Solution
Verified Answer
The free cash flow of the business entity is $755,000.
1Definition of Liquidity
Liquidity is the measure reflecting the capacity that a business entity possesses for repaying the obligations that will become due in a short period is known as liquidity.
2Calculation of Free Cash Flow
Particular | Amount $ |
Net cash provided by operating activities | $860,000 |
Less: Capital expenditure | (75,000) |
Less: Cash dividend | (30,000) |
Free Cash Flow | $755,000 |
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