Question

Hot and Cold has annual sales of $847,000, annual depreciation of $47,000, and net working capital of $43,000. The tax rate is 21 percent and the profit margin is 7.3 percent. The firm has no interest expense. What is the amount of the operating cash flow

Answer 1

Answer:

The amount of the operating cash flow is $108,831

Explanation:

In this question, we are tasked with calculating the amount of the operating cash flow.

Firstly, we calculate the net income.

Mathematically, net income = Sales × %  profit margin

From the question, sales = $847,000

% profit margin = 7.3% = 7.3/100 = 0.073

Net income = $847,000 × 0.073 = $61,831

Finally, Operating cash flow = Net income + Depreciation

From the question, depreciation = $47,000

Plugging this alongside the net income,

Operating cash flow = $61,831 + $47,000 = $108,831