Using the data from Years n and n-1 below, answer the following questions.

1. What are the companys assets, liabilities, and shareholder equity in Year n-1 and Year n?

2. What story does the balance sheet tell about changes in short term investments from Year n-1 to Year n?

3. What story does the balance sheet tell about changes in notes payable from Year n-1 to Year n?

4. What is the companys free cash flow in Year n?

5. As an investor, explain how you would use net income and free cash flow in evaluating the company.

Year n Year n-1 1 Short-term investments - 100 2 Interest 250 100 3 Depreciation and amortization 350 700 4 Common dividends 500 500 5 Cash 550 500 6 Accruals 550 500 7 Notes payable 1,000 200 8 Accounts payable 1,100 1,000 9 Long-term debt 1,500 1,000 10 Inventories 1,650 1,500 11 Accounts receivable 2,750 2,500 12 Common stock 5,000 4,000 13 Operating costs excluding depreciation 9,000 9,500 14 Sales 10,000 12,500 15 Tax rate 40% 40% 16 Net plant and equipment 4,000 4,200