Your firm has net income of $198 on total sales of $1,200. Costs are $715 and depreciation is $145. The tax rate is 34%. The firm does not have interest expenses. What is the operating cash flow?
A) $93
B) $241
C) $340
D) $383
E) $485

Question

Quizplus · Accepted Answer

Operating cash flow (OCF) is calculated as net income plus depreciation and taxes. Here, OCF = $198 (net income) + $145 (depreciation) + $102 (taxes, calculated as $198 / (1 - 0.34) - $198). This totals to $383.

Your Firm Has Net Income of $198 on Total Sales