Practice Exercise 2 Information for two companies in the same industry, Pearl In

Question

Practice Exercise 2

Information for two companies in the same industry, Pearl Industries and Whispering Winds Corp., is presented here.

Pearl Industries

Whispering Winds Corp.

Compute free cash flow for both companies and compare. (Show a negative free cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Pearl Industries

Whispering Winds Corp.

Pearl Industries

Whispering Winds Corp.

Net cash provided by operating activities $ 74,230 $104,300 Average current liabilities 52,900 106,800 Net income 206,200 206,200 Capital expenditures 38,970 63,920 Dividends paid 5,220 10,530

Explanation / Answer

Free cash flow = Net cash provided by operating activities - Capital expenditures -Dividends paid Pearl Industries 30040 =74230-38970-5220 Whispering Winds Corp. 29850 =104300-63920-10530

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