Answer:
hevelle, Inc., has sales of $39,500, costs of $18,400, depreciation expense of $1,900, and interest expense of $1,400If the tax rate is 35 percent, what is the operating cash flow?Operating Cash FlowTo calculate operating cash flow (OCF), we want to calculate revenues minus costs, but we don't want to include depreciation because it's not a cash outflow, and we don't want to include interest because it's a financing expense. We do want to include taxes because taxes are (unfortunately) paid in cash.EBIT = Earnings before interests and taxesIncome Statement:Sales 39,500Costs 18,400Depreciation 1,900EBIT= Sales – Costs – Depreciation = 19,200Interest1,400Taxable Income = EBIT – interest = 17,800Taxes (35%) Taxable income X Tax Rate % = 6,230Net Income Taxable income – taxes = 11,570
Explanation:
hevelle, Inc., has sales of $39,500, costs of $18,400, depreciation expense of $1,900, and interest expense of $1,400If the tax rate is 35 percent, what is the operating cash flow?Operating Cash FlowTo calculate operating cash flow (OCF), we want to calculate revenues minus costs, but we don't want to include depreciation because it's not a cash outflow, and we don't want to include interest because it's a financing expense. We do want to include taxes because taxes are (unfortunately) paid in cash.EBIT = Earnings before interests and taxesIncome Statement:Sales 39,500Costs 18,400Depreciation 1,900EBIT= Sales – Costs – Depreciation = 19,200Interest1,400Taxable Income = EBIT – interest = 17,800Taxes (35%) Taxable income X Tax Rate % = 6,230Net Income Taxable income – taxes = 11,570
