Free Cash Flow

In: Business and Management

Submitted By kamore
Words 371
Pages 2
Case study
Name
Institution

Question 1

Question 2 The free cash flow tells us that the company had the majority of its financing originate from the external capital. They would tend to acquire large short-term and long-term loans to purchase fixed assets and also fund their operation costs. It, therefore, shows it was endowed in debts and opted to reduce its dividends to try and reduce the wealth flowing out. The company also made a loss in 2014, they, however, devised new strategies and operation methods as the year turned to a close. It would prove beneficial since the operating costs would decrease in 2015 and they would see them make large sales, hence gaining a large net income in 2015.
Question 3

Question 4

They would have to place $336, 485.67 as their principal amount to gain the $500,000 amount within five years.
Question 5
The company should opt to increase their profit margin, as this would result in an increase in net income that would support its increase in assets. It would, therefore, reduce the need for external capital. It would reduce the need for external capital required by the company. They should opt for a change in operation, which would see them boost their sales price or reduce their costs. The margin would rise further, thus permitting faster growth of the company with less need for external capital (Gonzalez, 2007). The company can reduce their need for external capital for 2016 by employing a strategy that would see them reduce the money flowing out in terms of dividends. The company will, therefore, gain more from its retained profits and use it as their internal capital. The strategy will prove effective if they want to reduce the need for external capital and become more self-dependent. Companies love keeping their dividends and rising, to attract more shareholders to the company. Using this strategy would see their equity…...

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