Chuz: Assignment - Financial Statements, Cash Flow, and Taxes X 1. 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. A-Z ine 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. Financial update as of June 15 . Your existing business generates $99,000 in EBIT. The corporate tax rate applicable to your business is 35%. The depreciation expense reported in the financial statements is $18,857. You don't need to spend any money for new equipment in your existing cafs; however, you do need $14,850 of additional cash, You also need to purchase $7,920 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 $4,950. Based on your evaluation, you have in free cash flow. Free cash flow can be used for various reasons, including distributing it to stockholders and debtholders. Which of the following is not a use of free cash flow? Acquiring operating assets O Retiring debt-that is, to pay off debt