Final answer:
To determine Headland Corporation's free cash flow, you calculate it by adding net income and depreciation/amortization, subtracting changes in working capital and capital expenditures. This figure reflects the amount of cash available after necessary investments in the business are made.
Step-by-step explanation:
The question asks to determine the free cash flow for Headland Corporation. To compute free cash flow, we generally follow this formula: Free Cash Flow = Net Income + Depreciation/Amortization - Changes in Working Capital - Capital Expenditures. This requires information from the company's income statement and balance sheet. Net income is the profit after all expenses have been deducted from revenue. Depreciation and amortization are non-cash charges that need to be added back to net income. Changes in working capital represent the changes in current assets minus current liabilities. Lastly, capital expenditures refer to funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.
To calculate the free cash flow, you would start with the net income, add back any depreciation or amortization, adjust for any increase or decrease in working capital, and then subtract any capital expenditures made during the period. The result is the free cash flow, which provides insight into the amount of cash a company can generate after accounting for the capital expenditures needed to maintain or expand its asset base.