Question

Your firm has net income of $273 on total sales of $1,240. Costs are $690 and depreciation is $130. The tax rate is 35 percent. The firm does not have interest expenses. What is the operating cash flow

Answer 1

The operating cash flow is $403.

Step-by-step explanation:

Since the firm does not have interest expenses, proceed as follows:

Earning before interest and tax (EBIT) = Sales - Costs - Depreciation

= $1,240 - $690 - $130

Earning before interest and tax (EBIT) = $420

Taxes paid = EBIT × Tax rate = $420 × 35% = $147

Operating cash flow = EBIT + Depreciation -Taxes paid

= $420 + $130 - $147

Operating cash flow = $403

Therefore, the operating cash flow is $403.