A Firm Reports That in a Certain Year It Had

question 78

Multiple Choice

A firm reports that in a certain year it had a net income of $5.0 million, depreciation expenses of $3.0 million, capital expenditures of $2.0 million, and Net Working Capital decreased by $1.1 million. What is the firm's free cash flow for that year?

• A) $11.1 million
• B) $7.1 million
• C) $5.1 million
• D) $4.9 million

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Definitions:

Transactions

Financial events that affect the assets, liabilities, and equity of a company recorded in its accounting system.

Conversion Costs

The combined costs of direct labor and manufacturing overheads required to convert raw materials into finished goods.

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, converting them into the amount of finished goods units.

Processing Department

A distinct section in a manufacturing plant dedicated to conducting a specific phase of the production process.