1.PART 3: Conceptual Questions (suggested time: 40 minutes) (4 pts) (3.1) What does it mean when free cash flow on a company’s cash flow statement is positive? Is this always a good news? Explain and illustrate your answer with a numerical example. (3.2) An accountant explains to the executive committee of a company that the ideal ratio to measure the liquidity of a company is the current ratio. As a new CFO, you have been asked to comment on this. (3.3) A company with a positive free cash flow is always liquid. Proof it or give a numerical example if you think it is wrong. (3.4) Please comment: “When a company shows a negative value of equity on the balance sheet, it means it is in bankruptcy”. Illustrate your answer with a numerical example.
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