Financial statements for Hilton Company are presented below:

Hilton Company

Balance Sheet

December 31, 2014

Assets Liabilities & Stockholders Equity

Cash $ 40,000 Accounts payable $ 20,000

Accounts receivable 35,000 Bonds payable 50,000

Buildings and equipment 150,000 Common stock 65,000

Accumulated depreciation Retained earnings 60,000

buildings and equipment (50,000) $195,000

Patents 20,000

$195,000

Hilton Company

Statement of Cash Flows

For the Year Ended December 31, 2014

Cash flows from operating activities

Net income $55,000

Adjustments to reconcile net income to net cash

provided by operating activities:

Increase in accounts receivable $(16,000)

Increase in accounts payable 8,000

Depreciationbuildings and equipment 15,000

Gain on sale of equipment (6,000)

Amortization of patents 2,000 3,000

Net cash provided by operating activities 58,000

Cash flows from investing activities

Sale of equipment 12,000

Purchase of land (25,000)

Purchase of buildings and equipment (48,000)

Net cash used by investing activities (61,000)

Cash flows from financing activities

Payment of cash dividend (15,000)

Sale of bonds 30,000

Net cash provided by financing activities 15,000

Net increase in cash 12,000

Cash, January 1, 2014 28,000

Cash, December 31, 2014 $40,000

At the beginning of 2014, Accounts Payable amounted to $12,000 and Bonds Payable was $20,000.

Instructions

Calculate the following for Hilton Company:

a. Current cash debt coverage

b. Cash debt coverage

c. Free cash flow

d. Explain the purpose of free cash flow analysis.