Question

During the year, RIT Corp. had sales of $565,600. Costs of goods sold, administrative and selling expenses, and depreciation expenses were $476,000, $58,800, and $42,800, respectively. In addition, the company had an interest expense of $112,000 and a tax rate of 22 percent. What is the operating cash flow for the year

Answer 1

Answer:

The operating cash flow is $30,800

Explanation:

The earnings before interest and tax ,is computed thus:

Sales                                           $565,600

Costs of good sold                   ($476,000)

Gross profit                                $89,600

selling expenses                        ($58,800)

EBITDA                                        $30,800

Depreciation                                ($42800)

Net income(EBIT)                                  ($12000)

Operating cash flow =net income(EBIT) +depreciation

Operating cash flow    =-$12000+42800

Operating cash flow =$30,800

No tax is charged as losses were made instead of profit

The interest expense amount of $112,000 was not considered at all because  it would deducted in calculating net income and added when computing operating cash flow, overall, it has a zero impact