Suppose you are the only owner of a chain of coffee shops near universities. Your current cafes are doing well, but you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial performance:

Financial update as of June 15

Your existing business generates $87,000 in EBIT.The corporate tax rate applicable to your business is 25%.The depreciation expense reported in the financial statements is $16,571.You don't need to spend any money for new equipment in your existing cafes; however, you do need $13,050 of additional cash.You also need to purchase $6,960 in additional suppliessuch as tableclothes and napkins, and more formal tablewareon credit.It is also estimated that your accruals, including taxes and wages payable, will increase by $4,350.

Based on your evaluation you havein free cash flow.

Can a company have negative free cash flow?

Yes

No