Question

graff, incorporated, has sales of $49,800, costs of $23,700, depreciation expense of $2,300, and interest expense of $1,800. if the tax rate is 22 percent, what is the operating cash flow, or ocf? (do not round intermediate calculations.)

Answer 1

The Operating Cash Flow (OCF) for Graff, Incorporated, after calculating taxable income, taxes, and adding back depreciation expense, is $21,254.

Step-by-step explanation:

To calculate the operating cash flow (OCF), we follow these steps:

1. 
   
3. Start with Net Income, which is Sales minus Costs, Depreciation, and Interest, adjusted for Taxes.
4. 
   
6. Add back the non-cash Depreciation expense to the Net Income.

We use the given figures to calculate as follows:

• 
  
• Sales: $49,800
• 
  
• Costs: $23,700
• 
  
• Depreciation expense: $2,300
• 
  
• Interest expense: $1,800
• 
  
• Tax rate: 22%

First, we find the Taxable Income which is Sales minus Costs and Interest:

$49,800 - $23,700 - $1,800 = $24,300

Next, we calculate the Taxes by multiplying the Taxable Income by the Tax rate:

$24,300 × 22% = $5,346

The Net Income before taxes minus the actual Taxes gives us the Net Income:

$24,300 - $5,346 = $18,954

Then, we add back Depreciation to get the Operating Cash Flow:

$18,954 + $2,300 = $21,254

Thus, the Operating Cash Flow (OCF) for Graff, Incorporated is $21,254.