Question

Graff, Incorporated, has sales of $49,800, costs of $23,700, depreciation expense of $2,300, and interest expense of $1,800.

Answer 1

The operating cash flow of Graff, Incorporated is $19,460

What is operating cash flow?

The operating cash flow is the amount of cash derived from the normal operations of the business, it is determined as the net income plus the depreciation expense of the company, bearing in mind that the depreciation expense needs to be added because it is not an outright cash outflow

The net income is the sales minus costs of goods sold, depreciation expense, interest expense as well as tax expense whose rate is 22%.

In essence, our net income can be determined using the below formula:

net income=(sales-costs-depreciation expense-interest expense)*(1-tax rate)

sales=$49,800

costs=$23,700

depreciation expense=$2,300

interest expense=$1,800

tax rate =22%

net income=($49,800-$23,700-$2,300-$1,800)*(1-22%)

net income=$17,160

operating cash flow=net income+ depreciation expense

operating cash flow=$17,160+$2,300

operating cash flow=$19,460

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Missing part of the question:

If the tax rate is 22 percent, what is the operating cash flow, or OCF?