Instructions RadioShack Corporation is a consumer electronics retailer. Recently
ID: 2542585 • Letter: I
Question
Instructions RadioShack Corporation is a consumer electronics retailer. Recently, the company declared bankruptcy to provide financial protection while attempting to reorganize its operations. Annual report information for the three most recent years prior to the bankruptcy are as follows (in millions): Year 3 Year 2 Year 1 2Cash flows from operating activities 3 Cash used to purchase property,plant,and equipment 4 Sales 36.00 42.00) 3,434.00 $(43.00) (68.00) ,831.00 218.00 (82.00) 4,032.00 a. Determine the free cash flow. b. Determine the ratio of free cash flow to sales. Round percentages to one decimal place. c. Did the free cash flow information indicate financial stress? Explain. For those boxes in which you must enter subtractive or negative numbers use a minus sign.Explanation / Answer
Question a Free Cash flow = Cash flow from Operating activities - Capital expenditure In millions Year 3 Year 2 Year 1 Cash flow from Operating activities 36 -43 218 Cash used to purchase purchase property, plant and equipment -42 -68 -82 Free Cash flow -6 -111 136 Question b In millions Year 3 Year 2 Year 1 Free cash flow -6 -111 136 Sales 3434 3831 4032 Ratio of free cash flow to sales -0.2% -2.9% 3.4% Question c The free cash flow and the ratio of free cash flow to sales were negative in the most recent years before bankruptcy