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30 March, 20:16

Disturbed, Inc., had the following operating results for the past year: sales = $22,673; depreciation = $1,380; interest expense = $1,112; costs = $16,525. The tax rate for the year was 30 percent. What was the company's operating cash flow?

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  1. 30 March, 22:06
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    Operating cash flow is $3,939

    Explanation:

    Operating cash flows of a company can be calculated by adding non cash items to the net income earned for the year.

    Sales $22,673

    Costs ($16,525)

    Gross Income $6,148

    Depreciation ($1,380)

    Interest expense ($1,112)

    Income before tax $3,656

    Tax 30% ($1,097)

    Net Income $2,559

    Operating cash flows = Net income + non cash expenses

    As we know the depreciation is a non cash expense, so we add it back to net income to calculate the operating cash flows.

    Operating cash flows = $2,559 + $1,380 = $3,939
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