Cash-Generating Efficiency Ratios and Free Cash Flow

Examine the cash flow measures in requirement 2 of the review problem in this chapter. Discuss the meaning of these ratios.

Computing Cash Flows from Operating Activities: Indirect Method

Inter-Finance Corporation had a net income of $16,500 during 20×7. During the year, the company had depreciation expense of $7,000. Accounts Receivable increased by $5,500, and Accounts Payable increased by $2,500. Those were the company’s only current assets and current liabilities. Use the indirect method to determine net cash flows from operating activities.