Mandalay had cash flow from operations (in millions) of $358, cash flows from investments of -$160, cash flows from financing of -$198, and net income of $53. Mandalay had free cash flow of: a. $160 b. $0 c. $198 d. $251

The correct answer is:

$0 (b.)

Explanation:

Free cash flow refers to the cash a company generates after the cash that goes out to support operations and maintain capital asset have been made up for. It refers essentially to all the cash available to the owners of a business after all the operation expenses and investment capital has been accounted for. It is worthy of note that Free Cash Flows (FCFs) are different from net income.

In order to calculate the free cash flow, we have to identify all the cash inflows and the cash outflows, and subtract the cash outflows from the cash inflow.

Cash inflow = Cash flow from operations = $358 million

Cash outflow = cash flow from investment + cash flow from financing (They are denoted by the negative (-) sign)

Cash outflows (millions)= -$160 + (-$198) = -$358 million.

Therefore Free cash flow (million)= 358 - 358 = $0