Barnish Corporation issued the following statement of cash flows for 2012.
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BARNISH CORPORATION |
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Cash flows from operating activities |
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Net income |
$59,000 |
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Adjustments to reconcile net income to net cash |
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provided by operating activities: |
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Depreciation expense |
$ 9,100 |
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Decrease in accounts receivable |
9,500 |
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Increase in inventory |
(5,000) |
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Decrease in accounts payable |
(2,200) |
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Loss on sale of equipment |
3,300 |
14,700 |
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Net cash provided by operating activities |
73,700 |
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Cash flows from investing activities |
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Sale of investments |
3,100 |
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Purchase of equipment |
(24,200) |
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Net cash used by investing activities |
(21,100) |
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Cash flows from financing activities |
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Issuance of stock |
20,000 |
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Payment on long-term note payable |
(10,000) |
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Payment for dividends |
(13,000) |
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Net cash used by financing activities |
(3,000) |
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Net increase in cash |
49,600 |
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Cash at beginning of year |
13,000 |
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Cash at end of year |
$62,600 |
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(a) Compute free cash flow for Barnish Corporation.
(b) Explain why free cash flow often provides better information than “Net cash provided by operating activities.”