Free Cash Flow Martha's Moving Van 4U,Inc.had free cash flow during 2013 of $1 million,EBIT of $30 million,tax expense of $8 million,and depreciation of $4 million.Using this information,what was Martha's Accounts Payable ending balance in 2013?

Question

Quizplus · Accepted Answer

Free cash flow = EBIT - taxes - capital expenditures + depreciation
$1 million = $30 million - $8 million - capital expenditures + $4 million
Capital expenditures = $25 million
We can assume that accounts payable were used to finance capital expenditures. Therefore, the ending accounts payable balance would be equal to the capital expenditures: $25 million. Thus, the correct answer is (C) $35 million.