The Market Place Grill has annual sales of $1.9 million, depreciation of $238,000, and net working capital of $196,001. The ﬁrm has a tax rate of 35% and a proﬁt margin of 8.2%. The ﬁrm has no long-
Term debt. What is the amount of the operating cash ﬂow?

Question

Quizplus · Accepted Answer

Operating Cash Flow (OCF) = EBIT + Depreciation - Taxes
EBIT = Sales - Cost of Goods Sold (COGS) = $1.9 million - ($1.9 million * (1-8.2%)) = $1,743,800
OCF = $1,743,800 + $238,000 - ($1,743,800 + $238,000) * 35% = $393,800

The Market Place Grill Has Annual Sales of $1