Question

Your firm has net income of $260 on total sales of $1,160. Costs are $650 and depreciation is $110. The tax rate is 35 percent. The firm does not have interest expenses. What is the operating cash flow

Answer 1

The answer is $650

Step-by-step explanation:

Net income = $260

Total sales = $1,160

Costs = $650

Depreciation = $110

Earnings before Interest and tax(EBIT) =

Total sales - Cost - depreciation

$1,160 - $650 - $110

= $400

Tax =[260 ÷ (1 - 0.35)] - 260

$400 - $260

$140

Operating cash flow is therefore,

Earnings before Interest and tax(EBIT) + depreciation + tax

$400 + $110 + $140

= $650