For the first nine months of 2005, General Motors Corporation reported the following in its cash flow

Question:

For the first nine months of 2005, General Motors Corporation reported the following in its cash flow statement. GM runs an automobile operation supported by a financing arm, and both activities are reflected in these statements.

Net interest paid during the 2005 period was $4,059 million, compared with $3,010 million in the corresponding 2004 period. General Motors' tax rate is 36%. An analyst made a calculation of free cash flow from these numbers as follows (in million).

She opened her report to her clients, written the day after GM's third quarter report was published, with the words, "GM has dramatically increased its free cash flow. As a result, we are edging towards upgrading our recommendation from SELL to HOLD."
Calculate the appropriate free cash flow number for the two nine-month periods. What mistakes is the analyst making in suggesting that the increase free cash flow is good news?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...