If beginning cash is $60 million and free cash flow is -$80 million, what is ending cash before any revolver draw?

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Multiple Choice

If beginning cash is $60 million and free cash flow is -$80 million, what is ending cash before any revolver draw?

Explanation:
Ending cash before any revolver draw comes from adding the free cash flow to the starting cash. Free cash flow is the cash the business has available after operating needs and capital expenditures, and it’s the amount that can be used to fund other financing needs. With a beginning cash balance of 60 and a free cash flow of -80, the calculation is 60 + (-80) = -20. So ending cash before any revolver draw is negative 20 million, meaning there’s a cash shortfall that would typically be covered by a revolver draw. The revolver draw itself isn’t included in this step, since the question specifies ending cash before any revolver draw.

Ending cash before any revolver draw comes from adding the free cash flow to the starting cash. Free cash flow is the cash the business has available after operating needs and capital expenditures, and it’s the amount that can be used to fund other financing needs. With a beginning cash balance of 60 and a free cash flow of -80, the calculation is 60 + (-80) = -20. So ending cash before any revolver draw is negative 20 million, meaning there’s a cash shortfall that would typically be covered by a revolver draw. The revolver draw itself isn’t included in this step, since the question specifies ending cash before any revolver draw.

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