Question

Calculating OCF. Hailey, Inc., has sales of $38,530, costs of $12,750, depreciation expense of $2,550, and interest expense of $1,850. If the tax rate is 35 percent, what is the operating cash flow, or OCF?

Answer 1

Answer:

Explanation:

Firstly Calculate Net Income by constructing Income statement as follows:

                                      Hailey, Inc.

           Income Statement for the year end MM DD, YY

                                              $

Sales                                = 38,530

-Costs                              = 12,750

=Gross Income                = 25,780

-Depreciation Expense   = 2,550

=Operating Income         = 23,230

-Interest Expense            = 1,850

=Income before Tax        = 21,380

-Tax                                  = 7,483

=Net Income                    = 13,897

Now calculate Operating cash flow using above data:

Operating Cash flow = OCF = Net Income + Non cash expense

OCF = $13,897 + $2,550

OCF = $16,447