Question
For each of the following choose whether free cash flow goes up, goes down, stays the same or where the impact on free cash flow
For each of the following choose whether free cash flow goes up, goes down, stays the same or where the impact on free cash flow cannot be determined. You may assume the business is profitable and pays taxes on EBIT. Need detailed explanations as well.
a. Sales increase
b. Sales increase. COGS increase by the same amount.
c. Sales increase. Inventories increase by the same amount.
d. Sales increase. COGS increase by half the amount of the sales increase. Inventories decrease by the same amount that COGS increases.
e. CAPEX increases.
f. Sales increase. CAPEX increase.
g. CAPEX increases. Depreciation increases by the same amount that CAPEX increases.
h. Accounts receivables increase. Accounts payable increase by the same amount.
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