Pinkela Company reported revenues of $275,000 and expenses of $100,000 last year. The income tax rate was 40%. Depreciation expense of $25,000 was included in the expenses. How much was the net operating cash flows?

Question

Quizplus · Accepted Answer

Net operating cash flows are calculated by adding back non-cash expenses (like depreciation) to net income. Net income is calculated as revenues minus expenses and taxes. Here, net income is ($275,000 - $100,000) * (1 - 0.40) = $105,000. Adding back the depreciation of $25,000 gives $130,000.

Pinkela Company Reported Revenues of $275,000 and Expenses of $100,000