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:

Cravings

An intense, urgent, or abnormal desire or longing, especially for a specific substance or experience.

Opium

A narcotic drug obtained from the poppy plant, used historically for pain relief and known for its potential for addiction.

Barbiturates

A class of drugs used as sedatives and hypnotics, which can depress the central nervous system, leading to various effects from mild sedation to complete anesthesia.

Cocaine

An illicit narcotic with central nervous system stimulant effects, widely abused for its euphoric effects and potential for addiction.