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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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  1. 7 August, 18:34
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    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.
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