a.
|
2012 |
2011 |
|
|
Cash flow from operating activities |
$140,000 |
$120,000 |
|
Less: investments in fixed assets to maintain current production |
90,000 |
60,000 |
|
Free cash flow |
$50,000 |
$60,000 |
|
1 $120,000 x 75% |
||
|
2 $80,000 x 75% |
b. The change from $60,000 to $50,000 indicates an unfavorable trend.