Question

Square Hammer Corp. shows the following information on its 2018 income statement: Sales = $264,000; Costs = $170,000; Other expenses = $7,900; Depreciation expense = $14,500; Interest expense = $13,300; Taxes = $20,405; Dividends = $10,000. In addition, you’re told that the firm issued $4,800 in new equity during 2018 and redeemed $3,300 in outstanding long-term debt. a. What is the 2018 operating cash flow

Answer 1

The 2018 operating cash flow is $86,100.

Step-by-step explanation:

Operating Cash flow is different from Income as it only involves movement in cash.

Thus our first step is to find the Operating Income then adjust it with non-cash items to reach an Operating Cash flow amount.

Sales = $264,000

Less Costs = ($170,000)

Less Other expenses = ($7,900)

Depreciation expense = ($14,500)

Operating Income = $71,600

Adjust for non-cash item - depreciation

Operating Income = $71,600

Add back depreciation = $14,500

Operating Cash flow = $86,100

Interest expenses and taxes are not part of operating income as they arise out of secondary activities of the company.

Conclusion :

The 2018 operating cash flow is $86,100.