Question

Drop Dead Corp.'s sales for the year were $28M, its costs were

$12M, its interest expense was 0, and the taxes were $3M. Find the
operating cash flow

Answer 1

The operating cash flow can be calculated using the formula: Operating Cash Flow = Net Income + Depreciation + Changes in Working Capital. In this case, since we are not given the net income or depreciation, we can focus on the changes in working capital. Assuming the changes in working capital for this company are $5M, the operating cash flow would be $5M.

Step-by-step explanation:

Operating cash flow is a measure of the amount of cash a company generates from its regular business operations. To calculate operating cash flow, we start with the company's net income and make adjustments for non-cash expenses like depreciation and changes in working capital. In this case, we are given the following information:

• Sales = $28M
• Costs = $12M
• Interest expense = 0
• Taxes = $3M

To find the operating cash flow, we can use the formula:

Operating Cash Flow = Net Income + Depreciation + Changes in Working Capital

Since we are not given the net income or depreciation, we will focus on the changes in working capital. Working capital is calculated as:

Working Capital = Current Assets - Current Liabilities

By subtracting the current liabilities from the current assets, we can calculate the changes in working capital. Let's assume the changes in working capital for this company are $5M. Considering that the net income is usually before taxes and interest expenses, we also assume the taxes and interest expenses are 0. Therefore, we can calculate the operating cash flow as:

Operating Cash Flow = Net Income + Depreciation + Changes in Working Capital = 0 + 0 + $5M = $5M