Question

Ridiculousness, Inc., has sales of $43,000, costs of $25,100, depreciation expense of $1,500, and interest expense of $1,500. If the tax rate is 35 percent, what is the operating cash flow, or OCF?

Answer 1

operating cash flow = $12,685

Step-by-step explanation:

given data

sales = $43,000

costs = $25,100

depreciation expense = $1,500

interest expense = $1,500

tax rate = 35

solution

first we get here Net income that is express as

Net income = Sales - depreciation expense - interest expense .......1

Net income = $43,000 - $25,100 - $1,500 - $1,500

Net income = $14900

and here Tax Expense is 35 % of Net income

Tax Expense is 35 % of $ 14,900 = $5215

so Net Income after tax is = $14900 - $5215 = $9685

now we get here operating cash flow that is express as

operating cash flow = Net Income after tax + Depreciation expense + Interest Expense .............2

operating cash flow = 9,685 + 1,500 + 1,500

operating cash flow = $12,685