The focus on traditional financial statements is -Select- data rather than cash flow. However, cash flow is important to investors, managers, and stock analysts. Therefore, corporate decision makers and security analysts need to modify accounting data provided to them. A Off important modification is the concept of free cash flow (FCF). Many analysts regard FCF as being the single and most important number that can be developed from the accounting statements, even more important than net income. The equation for free cash flow is: FCF [EBIT(1-T) + Depreciation and amortization] [Capital expenditures + ANet operating working capital] made investments in fixed assets, new products, and -Select- -Select- cash flow is the cash flow actually available for payments to all investors (stockholders and debtholders) after the company has A negative FCF means that the company does not have sufficient -Select- funds to finance its investments in fixed assets and working capital, and that it will have to raise new money in the -Select- markets to pay for these investments. Negative FCF is not always bad. If FCF is negative because after-tax operating income is negative this is bad, because the company is probably experiencing operating problems. Exceptions to this might be startup companies, companies incurring significant expenses to launch a new product line, and high-growth companies-with large capital investments. Quantitative Problem: Rosnan Industries 2019 and 2018 balance sheets and income statements are shown below. Ascote Balance Sheets 2019 2018