Question

Graff, Incorporated, has sales of $49,500, costs of $22,800, depreciation expense of $2,200, and interest expense of $1,950. If the tax rate is 22 percent, what is the operating cash flow, or OCF

Answer 1

The operating cash flow, or OCF is $21,736

What is operating cash flow?

Operating cash flow (OCF) is a measure of the amount of cash generated by a company's normal business operations.

Computation of OCF is shown below:

Sales                      $49,500

Less:

Cost                        ($22,800)

Depreciation          ($2,200)

EBIT                        $24,500

Less:

Interest                   ($1,950)

Profit before tax     $22,550

Less:

Tax 22%                  ($4,961)

Net income             $17,589

EBIT                         $24,500

Less:

Tax 22%                  ($4,961)

Add:

Depreciation           $2,200

Operating cash flow $21,736

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