Worked-example setupScope and assumptions
- Cedar Trail is fictional, and the cash-flow amounts are supplied for reconciliation practice.
- Purchases of property, plant, and equipment are the stated capital-expenditure deduction in both presentations.
- The expanded presentation also deducts dividends; neither result proves discretionary availability.
- Period
- One annual period
- Units
- US dollars
- Rounding
- Display whole dollars
Cedar reports $84,000 net cash provided by operating activities. Purchases of property, plant, and equipment are $32,000. Dividends paid are $12,000.
Common presentation
The declared formula subtracts only capital expenditures:
$84,000 operating cash flow - $32,000 capital expenditures = $52,000
Expanded presentation
A second declared formula also subtracts dividends:
$84,000 - $32,000 - $12,000 = $40,000
Both calculations are correct under their stated definitions. The $12,000 gap is definitional, not an operating-cash-flow difference. Neither result says whether capital spending is for maintenance or growth. Neither proves that the remainder is available after debt service, leases, taxes, acquisitions, or other operating needs.
Use the independent Northstar task to reconcile another pair of definitions.
Verified calculation · free cash flow analysis
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- scenarios
- 2 fields
Inspect data
{
"common_presentation": {
"deductions": {
"capital_expenditures": 32000
},
"operating_cash_flow": 84000,
"reported_free_cash_flow": 52000
},
"expanded_presentation": {
"deductions": {
"capital_expenditures": 32000,
"dividends": 12000
},
"operating_cash_flow": 84000,
"reported_free_cash_flow": 40000
}
}Recomputed result
| Measure | Value |
|---|---|
| common presentation capital expenditures | 32,000 |
| common presentation free cash flow | 52,000 |
| common presentation operating cash flow | 84,000 |
| common presentation total deductions | 32,000 |
| expanded presentation capital expenditures | 32,000 |
| expanded presentation dividends | 12,000 |
| expanded presentation free cash flow | 40,000 |
| expanded presentation operating cash flow | 84,000 |
| expanded presentation total deductions | 44,000 |