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XYZ Company, a 'for-profit' business, had revenues of $12 million in 2016. Expenses other than depreciation...

XYZ Company, a 'for-profit' business, had revenues of $12 million in 2016. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million. XYZ Company, must pay taxes at a rate of 40 percent of pretax (operating) income. All revenues were collected in cash during the year, and all expenses other than depreciation were paid in cash.  

What was XYZ's total cash flow?

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Answer #1

Revenue in cash = cash inflow = $12,000,000

Expenses other than depreciation = cash outflow = 75% of revenue = 0.75 * 12,000,000 = $9,000,000

Tax paid = cash outflow = Profit before tax * tax rate

Profit before tax = Revenue - expenses other than depreciation - depreciation = 12,000,000 - 9,000,000 - 1,500,000 = $1,500,000

Tax = $1,500,000 * 0.40 = $600,000 is cash outflow also

Calculation of Net cash outflow

Particulars $'000
Revenue 12000
Less: Expenses 9000
Less: Depreciation 1500
PBT 1500
Less: Tax @ 40% 600
PAT 900
Add: Depreciation 1500
Net cash inflow 2400
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