Question

Using the information in BE5-14, determine Martinez’s free cash flow, assuming that it reported net cash provided by operating activities of \(400,000.

BE5-14 (L05) Martinez Corporation engaged in the following cash transactions during 2017.

Sale of land and building \)191,000

Purchase of treasury stock 40,000

Purchase of land 37,000

Payment of cash dividend 95,000

Purchase of equipment 53,000

Issuance of common stock 147,000

Retirement of bonds 100,000

Compute the net cash provided (used) by investing activities.

Short answer

Free cash flow for the business entity is$215,000.

Step-by-step solution

Definition of Free Cash Flow

The cash that will be available with the business entity after paying for the acquisition of the capital assets and any cash dividend paid is known as free cash flow.

Free Cash Flow

Particular	Amount $
Cash from operating activities	$400,000
Less: Capital expenditure	(90,000)
Less: Dividend paid	(95,000)
Free Cash Flow	$215,000