Question

Moby Dic Corporation has sales of $4,395,721; income tax of $457,889; the selling, general and administrative expenses of $257,675; depreciation of $318,563; cost of goods sold of $2,585,565; and interest expense of $145,183. Calculate the amount of the firm’s after-tax cash flow from operations?

Answer 1

The amount of the firm's after-tax cash flow from operations is $1,430,826.

Step-by-step explanation:

To calculate the firm's after-tax cash flow from operations, we need to start with the sales and deduct all the relevant expenses, including income tax, selling, general and administrative expenses, depreciation, cost of goods sold, and interest expense.

First, we deduct the cost of goods sold from the sales to calculate the gross profit. Sales - Cost of goods sold = Gross profit.

Next, we subtract the selling, general and administrative expenses and depreciation from the gross profit to obtain the operating income. Gross profit - Selling, general and administrative expenses - Depreciation = Operating income.

Then, we subtract the income tax and interest expense from the operating income to determine the net income. Operating income - Income tax - Interest expense = Net income.

Finally, to calculate the after-tax cash flow from operations, we add back the depreciation to the net income. Net income + Depreciation = After-tax cash flow from operations.

By plugging in the given values, we can calculate the after-tax cash flow from operations as $1,430,826.

This represents the amount of cash generated from the firm's operational activities after deducting all relevant expenses and taxes. It is an important measure of the firm's ability to generate cash from its core operations.

Answer 2

The after-tax cash flow from operations for Moby Dic Corporation is calculated by subtracting the cost of goods sold, selling, general and administrative expenses, and income tax from the sales, then adding back the depreciation. The result is $1,413,155.

Step-by-step explanation:

To calculate the firm’s after-tax cash flow from operations, we start with sales and subtract the expenses that are relevant to operations. Firstly, we exclude interest expense since it's a financing cost, and we add back depreciation as it is a non-cash expense.

The formula for after-tax cash flow from operations is as follows:

1. Sales
2. Minus: Cost of Goods Sold (COGS)
3. Minus: Selling, General and Administrative Expenses (SG&A)
4. Minus: Income Tax
5. Add: Depreciation

Applying this formula to Moby Dic Corporation, we get:

Sales: $4,395,721

Minus COGS: $2,585,565

Minus SG&A: $257,675

Minus Income Tax: $457,889

Add Depreciation: $318,563

After-tax Cash Flow from Operations = $4,395,721 - $2,585,565 - $257,675 - $457,889 + $318,563

After-tax Cash Flow from Operations = $1,413,155

Therefore, the after-tax cash flow from operations for Moby Dic Corporation is $1,413,155.