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Determine the ratio of free cash flow to sales

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Reference no: EM132719449

Problem - Aeropostale, Inc. (AROPQ) is a specialty retailer of casual apparel and accessories for teens. 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

Cash flows from operating activities

$(68)

$(56)

$(38)

Cash used to purchase property, plant, and equipment

(16)

(24)

(84)

Sales

1,507 

1,839 

2,091 

Required -

a. Determine the ratio of free cash flow to sales. Round percentages to one decimal place.

b. Did the free cash flow information indicate financial stress? Explain.

Reference no: EM132719449

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