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disturbed, inc., had the following operating results for the past year: sales = $22,616; depreciation... Question:...

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disturbed, inc., had the following operating results for thepast year: sales = $22,616; depreciation... Question: Disturbed,Inc., had the following operating results for the past year: sales= $22,616; deprecia... Disturbed, Inc., had the following operatingresults for the past year: sales = $22,616; depreciation = $1,480;interest expense = $1,192; costs = $16,575. The tax rate for theyear was 38 percent. What was the company's operating cashflow?

$2,089 $3,369 $4,761 $7,321 $3,213

Answer & Explanation Solved by verified expert
3.8 Ratings (478 Votes)

Solution:
Answer is 3rd option $4,761
Working Notes:
A Sales 22,616
B Costs 16,575
C Depreciation 1,480
D=A-B-C Earnings before interests and taxes (EBIT) 4,561
E Interest expense 1,192
F=D-E Earnings before taxes (EBT) 3,369
G = F x 38% Tax ( 38% x 3,369) 1280.22
H = F-G Net Income 2,088.78
operating cash flow
I Earnings before interests and taxes (EBIT) 4,561
J Add: Depreciation 1,480
K Less: Taxes 1280.22
L=I+J-K operating cash flow 4,760.78
4,761 (rounded off)
Notes: Operating cash flow is actual cash flow from operation as depreciation expense is non cash expense and interest expense is financing expense so it is not considered in operating cash flow calculation
Please feel free to ask if anything about above solution in comment section of the question.

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Transcribed Image Text

disturbed, inc., had the following operating results for thepast year: sales = $22,616; depreciation... Question: Disturbed,Inc., had the following operating results for the past year: sales= $22,616; deprecia... Disturbed, Inc., had the following operatingresults for the past year: sales = $22,616; depreciation = $1,480;interest expense = $1,192; costs = $16,575. The tax rate for theyear was 38 percent. What was the company's operating cashflow?$2,089 $3,369 $4,761 $7,321 $3,213

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