Question

Ridiculousness, Inc., has sales of $48,000, costs of $21,200, depreciation expense of $1,900, and interest expense of $1,200. If the tax rate is 35 percent, what is the operating cash flow, or OCF

Answer 1

Answer:

OCF = $18,505

Explanation:

To calculate OCF, we first need the income statement:

Income Statement

Sales $ 48,000

Costs 21,200

Depreciation 1,900

EBIT $ 24,900

Interest 1,200

Taxable income $ 23,700

Taxes (35%) 8295

Net income $ 15,405

OCF = EBIT + Depreciation - Taxes

OCF = $24,900 + 1,900 - 8,295

OCF = $18,505