Question
Larrys best friend, Garfield, owns a lasagna factory. Garfields financial skills are not very strong, so he asked Larry to take a look at his
Larrys best friend, Garfield, owns a lasagna factory. Garfields financial skills are not very strong, so he asked Larry to take a look at his financials. Here is the information Garfield provided to Larry for 2019.
- Sales were $23,730
- COGS were $16,780
- Depreciation was $2,840
- Interest paid was $414
- Tax rate was 35%
- The paid dividends were $616
Garfield also gathered some balance sheet information for 2018 and 2019. The numbers are presented in the following table. December 31, 2018 December 31, 2019 Current Assets $2,940 $3,528 Net Fixed Assets $16,560 $18,840 Current Liabilities $2,592 $2,484
December 31, 2018 | December 31, 2019 | |
Current Assets | $2,940 | $3,528 |
Net Fixed Assets | $16,560 | $18,840 |
Current Liabilities | $2,592 | $2,484 |
Because Larry is very busy following the current market developments, he asked you to help him. You must
a) Compute the net income
b) Compute the operating cash flow
c) Compute the free cash flow
d) Explain and interpret the positive or negative sign of your answer in part c.
Check point: OCF = $5,511.50
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