Question

Based on the following data, calculate the cash flow from operation for the firm: Revenue =100,000, labor cost =30,000, material cost =10,000, Depreciation of Equipment = 20,000, Income tax rate =30%

A. 52,000
B. 28,000
C. 68,000
D. 48,000
E. 40.000

Answer 1

The cash flow from operations of the firm, after calculating operating income, subtracting taxes, and adding back the non-cash depreciation charge, is $62,000, which is not listed in the provided choices.

Step-by-step explanation:

To calculate the cash flow from operations for the firm, we need to consider only the operating expenses and revenues, and exclude non-cash charges like depreciation when calculating net income before taxes. Here's the step-by-step calculation:

1. Start with Revenue, which is $100,000.
2. Subtract operating costs: labor cost of $30,000, and material cost of $10,000.
3. Calculate operating income before tax: $100,000 - $30,000 - $10,000 = $60,000.
4. Calculate income tax: 30% of operating income, which is 0.30 x $60,000 = $18,000.
5. Subtract income tax from operating income to get net income: $60,000 - $18,000 = $42,000.
6. Add back the non-cash charge of depreciation: $42,000 + $20,000 = $62,000.

Therefore, the cash flow from operations is $62,000, which is not one of the options provided. Perhaps there is a typo in the options or an error in the provided data.