Question

Catering Corp. reported free cash flows for 2018 of $8 million and investment in operating capital of $2 million. Catering listed $1 million in depreciation expense and $2 million in taxes on its 2018 income statement. What was Catering's 2018 EBIT

Answer 1

Answer:

$11 million

Step-by-step explanation:

Calculation for Catering's 2018 EBIT

Using this formula

First step

EBIT = Earning's Before Interest and Taxes

Operatin Cash Flow = Free Cash Flow + Investment in Operating Capital

-8 million + 2 million = 10 million

Second step

Operating Cash Flow= EBIT - Taxes + Depreciation

-10million = EBIT - 2 million + 1 million

=-10 million =EBIT -1

EBIT = 10 million + 1 million

EBIT =11 million

Therefore Catering's 2018 EBIT will be $11 million