Chicago Corporation issued the following statement of cash flows for 2010.
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CHICAGO CORPORATION |
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Cash flows from operating activities |
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Net income |
$19,000 |
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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 |
$ 8,100 |
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Loss on sale of equipment |
1,300 |
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Decrease in accounts receivable |
6,900 |
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Increase in inventory |
(4,000) |
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Decrease in accounts payable |
(2,000) |
10,300 |
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Net cash provided by operating activities |
29,300 |
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Cash flows from investing activities |
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Sale of investments |
1,100 |
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Purchase of equipment |
(19,000) |
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Net cash used by investing activities |
(17,900) |
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Cash flows from financing activities |
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Issuance of stock |
10,000 |
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Payment on long term note payable |
(5,000) |
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Payment for dividends |
(9,000) |
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Net cash used by financing activities |
(4,000) |
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Net increase in cash |
7,400 |
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Cash at beginning of year |
10,000 |
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Cash at end of year |
$17,400 |
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(a) Compute free cash flow for Chicago Corporation. (b) Explain why free cash flow often provides better information than “Net cash provided by operating activities.