Question

A firm has sales of $722,000 and a profit margin of 9.3 percent.

The annual depreciation expense is $79,000. What is the amount of
the operating cash flow if the company has no long-term debt?

Answer 1

Okay, here are the steps to solve this problem:

1) Sales: $722,000

2) Profit margin: 9.3%

So profit = Sales * Profit margin = $722,000 * 0.093 = $66,946

3) Depreciation expense: $79,000

4) Operating cash flow = Profit + Depreciation

= $66,946 + $79,000 = $145,946

5) Since the company has no long-term debt, the operating cash flow is simply the profit plus depreciation.

So the operating cash flow if the company has no long-term debt is $145,946.

Does this make sense? Let me know if you have any other questions!