Question

Falstaff Consulting had annual sales of $3.125 million, operating expenses of $2.125 million, depreciation expense of...

Falstaff Consulting had annual sales of $3.125 million, operating expenses of $2.125 million, depreciation expense of $570,000, net income of $252,800, and at a tax rate of 21% paid $67,200 in taxes. Operating cash flows for Falstaff are closest to:

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Answer #1

Solution :

The Operating Cash Flow is calculated using the formula

= Net Income + Non cash expenses ( +/ - ) Changes in net working capital

As per the information given in the question we have

Net Income = $ 252,800 ; Non cash expenses = Depreciation = $ 570,000 ;

No details about changes in net working capital have been given in the question. Hence assumed to be zero.

Thus we have the operating cash flow for Falstaff as

= $ 252,800 + $ 570,000

= $ 822,800

Thus the operating cash flows for Falstaff are closest to = $ 822,800

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