Zielinski OAO issued the following statement of cash flows for 2020.

(a) Compute free cash flow for Zielinski. 

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

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Zielinski OAO Statement of Cash Flows-Indirect Method For the Year Ended December 31, 2020 Cash flows from operating activities € 59,000 Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Loss on disposal of plant assets € 9,400 3,300 Decrease in accounts receivable 8,500 Increase in inventory Decrease in accounts payable (5,000) (2,500) 13,700 Net cash provided by operating activities 72,700 Cash flows from investing activities Sale of investments 3,100 Purchase of equipment (26,000) Net cash used by investing activities (22,900) Cash flows from financing activities Issuance of shares 20,000 Payment on long-term note payable Payment for dividends (10,000) (16,000) Net cash used by financing activities (6,000) Net increase in cash 43,800 Cash at beginning of year Cash at end of year 13,000 € 56,800