Free Cash Flow

Sweeter Enterprises Inc. has cash flows from operating activities of $460,000. Cash flows used for investments in property, plant, and equipment totaled $87,000, of which 80% of this investment was used to replace existing capacity.

a. Determine the free cash flow for Sweeter Enterprises Inc. $fill in the blank 1

b. How might a lender use free cash flow to determine whether or not to give Sweeter Enterprises Inc. a loan? Free cash flow is often used to measure the financial strength of a business. The more free cash flow that a business has, the easier it will be for the company to pay the interest on the loan and repay the loan principal. Sweeters free cash flow is $fill in the blank 3, which is very strong .