Ann's Custom Catering has sales of $214,000, depreciation of $9,000, and net working capital of $16,000. The ﬁrm has a tax rate of 34% and a proﬁt margin of 7%. The ﬁrm has no interest expense.
What is the amount of the operating cash ﬂow?

Question

Quizplus · Accepted Answer

Operating cash flow = EBIT * (1 - Tax rate) + Depreciation - Change in NWC= (Sales * Profit margin) * (1 - Tax rate) + Depreciation - Change in NWC= (214,000 * 0.07) * (1 - 0.34) + 9,000 - 0= 23,980

Ann's Custom Catering Has Sales of $214,000, Depreciation of $9,000