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mpany’s operating profit in a particul

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter16: Statement Of Cash Flows

Section: Chapter Questions

Problem 14Q: What insight does the calculation of free cash flow provide about the companys cash flow position?

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Question

Why might a company’s operating profit in a particular period be different from its cash flow from operations

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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