The focus on traditional financial statements is data rather than cash flow. However, cash flow is important to investors, managers, and stock analysts. Therefore, corporate decision makers and that can be developed from the accounting statements, even more important than net income. The equation for free cash flow is: FCF=[EBIT(1T)+ Depreciation and amortization ][ Capital expenditures + Net operating working capital ] | money in the . A negative FCF means that the company does not have sufficient investments. Quantitative Problem: Rosnan Industries' 2019 and 2018 balance sheets and income statements are shown below. Quantitative Problem: Rosnan Industries' 2019 and 2018 balance sheets and income statements are shown below. Balance Sheets Assets Cash and equivalents Accounts receivable Inventories Total current assets Net plant and equipment Total assets Liabilities and Equity Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Common equity Total liabilities and equity \begin{tabular}{rr} 2019 & 2018 \\ \hline$100 & $85 \\ 275 & 300 \\ 375 & 250 \\ \hline$750 & $635 \\ 2,300 & 1,490 \\ \hline$3,050 & $2,125 \\ \hline \hline \end{tabular} \begin{tabular}{rr} $150 & $85 \\ 75 & 50 \\ 150 & 75 \\ \hline$375 & $210 \\ 450 & 290 \\ \hline 825 & 500 \\ 1,225 & 1,225 \\ 1,000 & 400 \\ \hline 2,225 & 1,625 \\ \hline$3,050 & $2,125 \\ \hline \hline \end{tabular} Income Statements The balance in the firm's cash and equivalents account is needed for operations and is not considered "excess" cash. $