6. Free cash flow Accounting statements represent a company's earnings, but this is not the real cash that a company generates. Earnings data can be manipulated and can be deceiving. Thus, corporate decision makers and security analysts focus on the free cash flow that a firm generates to analyze the company's real cash position. Which of the following statements best describes free cash flow? O Cash flows generated by operating the business O Residual cash flow after taking into account operating cash flows, including fixed asset acquisitions, asset sales, and working-capital expenditures Suppose you are the only owner of a chain of coffee shops near universities. Your current cafs are doing well, but you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial performance: Financial update as of June 15 Your existing business generates $135,000 in EBIT. The corporate tax rate applicable to your business is 25%. The depreciation expense reported in the financial statements is $25,714. You don't need to spend any money for new equipment in your existing cafs; however, you do need $20,250 of additional cash. You also need to purchase $10,800 in additional supplies-such as tableclothes and napkins, and more formal tableware-on credit. It is also estimated that your accruals, including taxes and wages payable, will increase by $6,750. Based on your evaluation you have in free cash flow. $113,464 Can a company have negative free $117,514 No $160,71420,250 Yes $167,464 Grade it Now Save & Continue