Selected information (in US$ millions) for two close competitors, Potash Corporation of Saskatchewan Inc. and Agrium Inc., follows for the year ended December 31, 2011:
Potash Agrium
Profit.........................................................$3,081.....................$1,508
Cash provided by operating activities....................3,485.......................1,350
Cash used by investing activities.......................(2,251) .......................(151)
Cash used by financing activities......................(1,216)....................... (423)
Cash and cash equivalents, end of period................430..........................635
Dividends paid.............................................(208) ........................(18)
Instructions
(a) Calculate the free cash flow for each company.
(b) Which company appears to be in the stronger financial position?
TAKING IT FURTHER By comparing the companies' cash flows, can you tell which company is likely in a growth stage? Explain.