Concord Corporation reported net cash provided by operating activities of $349,400, net cash used by investing activities of $145,800 (including cash spent for capital assets of $204,400), and net cash provided by financing activities of $75,900. Dividends of $128,500 were paid. Calculate these values:

(a) Free cash flow $
(b) Current cash debt coverage times
(c) Cash debt coverage times

a) Free Cash flow = $ 157,600

c)  Cash debt Coverage times = 1.71 times              

Explanation:

a) Future cash flow refers to the amount that is available with the company for payment of dividends and future investments etc.

It can be calculated as;

Free Cash flow = Cash flow from operating activities - Less Capital Expenditures (investment)

Cash Flow from operating activities = $349,400

Capital Expenditures = ($ 204,400)

Free Cash flow = $ 145,000

c) Cash debt coverage times ratio shows the ability of the company to pay off its debts from its operation.

Mathematically it can be calculated as;

Cash debt coverage times = Net cash from operating activities/ Total Liabilities.

In the given question, however, value for total liabilities is not given, it can be calculated as by the following formula;

Cash Flow from Financing activities = Cash in flow from issuing debt -

(Dividends paid as cash + Debt & Equity repurchase)

Putting the values in above equation      

$ 75,900 = Cash in flow from issuing debt - ( $ 128,500 + 0)                                                                                                                                                                                                                                                          

Cash in flow from issuing debt = $ 75,900 + $ 128,500 = $  204,400.

Total Debt = $ 204,400

Cash debt coverage times = Net cash from operating activities/ Total Liabilities.                                  

Cash debt coverage times = $349,400/$ 204,400

Cash debt coverage times = 1.71 times.

The ideal cash debt coverage ratio is 1 : 1. If the ratio is greater than 1, it shows soundness of the business in paying off its debts from the cash flow of operating activities.

b) Current Cash debt coverage ratio measure whether the company can meets its current liabilities with the current operating cash flow or not.

Mathematically,

Current Cash debt coverage ratio = Net cash from operating activities/ Average current liabilities.

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