You Are Considering an Investment in Fields and Struthers, Inc

question 103

Multiple Choice

You are considering an investment in Fields and Struthers, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $52 million, paid taxes of $10 million, and its depreciation expense was $5 million. Fields and Struthers' gross fixed assets increased by $38 million from 2010 to 2011. The firm's current assets increased by $20 million and spontaneous current liabilities increased by $12 million. Calculate Fields and Struthers' operating cash flow (OCF) , investment in operating capital (IOC) and free cash flow (FCF) for 2011.

• A) OCF = $42,000,000; IOC = $37,000,000; FCF = $5,000,000
• B) OCF = $47,000,000; IOC = $37,000,000; FCF = $10,000,000
• C) OCF = $42,000,000; IOC = $46,000,000; FCF = -$4,000,000
• D) OCF = $47,000,000; IOC = $46,000,000; FCF = $1,000,000

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Definitions:

In-process Inventory

Goods and materials that are partially completed in the manufacturing process but are not yet finished products.

Social Issues

Societal concerns that affect a significant number of people and may require collective action for resolution.

Corporate Spending

The expenditure by businesses on various needs, including operations, capital investment, employee salaries, and marketing efforts.

Community Involvement

The engagement and participation of businesses or individuals in activities that benefit their local community.