ANALYZING THE STATEMENT OF CASH FLOWS
Rollins Inc. is considering expanding its operations into different regions of the country; however this expansion will require significant cash flow as well as additional financing. Rollins reported the following information for 2009: cash provided by operating activ- ities, $425,000; cash provided by investing activities, $115,000; average debt maturing over the next five years, $380,000; capital expenditures, $240,000; dividends, $40,000.
Required:
Compute free cash flow and the cash flow adequacy ratio. Comment on Rollins' ability to expand its operations.