Your firm has net income of $273 on total sales of $1,240. Costs are $690 and depreciation is $130. The tax rate is 35 percent. The firm does not have interest expenses. What is the operating cash flow

Question

Business

Cynthia Dunn

7 August, 15:23

Your firm has net income of $273 on total sales of $1,240. Costs are $690 and depreciation is $130. The tax rate is 35 percent. The firm does not have interest expenses. What is the operating cash flow

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Answers (1)

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Madeleine Patrick · Answer 1

The operating cash flow is $403.

Explanation:

Since the firm does not have interest expenses, proceed as follows:

Earning before interest and tax (EBIT) = Sales - Costs - Depreciation

= $1,240 - $690 - $130

Earning before interest and tax (EBIT) = $420

Taxes paid = EBIT * Tax rate = $420 * 35% = $147

Operating cash flow = EBIT + Depreciation - Taxes paid

= $420 + $130 - $147

Operating cash flow = $403

Therefore, the operating cash flow is $403.