Question

Disturbed, Inc., had the following operating results for the past year: sales = $22,676; depreciation = $1,440; interest expense = $1,160; costs = $16,555. The tax rate for the year was 38 percent. What was the company's operating cash flow?

Answer 1

Answer:

$4,783

Explanation:

The operating cash flow is shown below:

= Earning after tax + interest expense + depreciation expense

where,  

EAT = Sales - costs - depreciation expense  - interest expense - income tax expense

= $22,676 - $16,555 - $1,440 - $1,160 - $1,338

= $2,183

The income tax expense would be

= (Sales - costs - depreciation expense  - interest expense) × tax rate

= ($22,676 - $16,555 - $1,440 - $1,160) × 38%

= $1,338

So, the operating cash flow would be

= $2,183 + $1,160 + $1,440

= $4,783