Question

A debt-free firm has total sales of $22,980, costs of $14,715, and depreciation of $6,045. What is the operating cash flow at a tax rate of 23 percent?

Answer 1

Answer:

$7,754.4

Explanation:

Given the above information, first we need to calculate profit before tax

Profit before tax = Total sales - Cost of goods sold - depreciation

= $22,980 - $14,715 - $6,045

= $2,220

Profit before tax = $2,220

Tax rate = 23%

Then, we will calculate

Net profit before tax

= Profit before tax × ( 1 - tax rate)

= $2,220 × ( 1 - 23%)

= $1,709.4

Then,

Operating cash flow

= Net profit + depreciation

= $1,709.4 + $6,045

= $7,754.4