Question

Pompeii, Inc., has sales of $50,000, costs of $23,000, depreciation expense of $2,250, and interest expense...

Pompeii, Inc., has sales of $50,000, costs of $23,000, depreciation expense of $2,250, and interest expense of $2,000.
If the tax rate is 23 percent, what is the operating cash flow, or OCF? (Do not round intermediate calculations.)
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Answer #2

OCF is said to be the cash flow generated from operating activities. It can be calculated as

Total Revenue - Operating expenses

Net income +/- Changes in assets & liabilities + Non cash expenses

EBIT + Depreciation - Taxes +/- Change in Working Capital

$
Sales       50,000.00
Less: Costs       23,000.00
Depreciation         2,250.00
EBIT       24,750.00
Less: Interest         2,000.00
Income Before Income Tax (EBT)       22,750.00
Less: Income Tax@23%         5,232.50
Net Income       17,517.50

EBIT + Depreciation - Taxes +/- Change in Working Capital

24750 + 2250 -5232.50

21,767.50

answered by: anonymous
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