Grinders Corporation issued the following statement of cash flows for 2010.

(a) Compute free cash flow for Grinders Corporation.

(b) Explain why free cash flow often provides better information than “Net cash provided by operating activities.”

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GRINDERS CORPORATION Statement of Cash Flows-Indirect Method For the Year Ended December 31, 2010 Cash flows from operating activities $59,000 Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense $9,100 9,500 3,300 (5,000) (2,200) Decrease in accounts receivable Loss on sale of equipment Increase in inventory Decrease in accounts payable 14,700 Net cash provided by operating activities 73,700 Cash flows from investing activities Sale of investments Purchase of equipment 3,100 (27,000) (23,900) Net cash used by investing activities Cash flows from financing activities Issuance of stock 20,000 (10,000) (15,000) Payment on long-term note payable Payment for dividends Net cash used by financing activities (5,000) Net increase in cash Cash at beginning of year Cash at end of year 44,800 13,000 $57,800