For the year,Jensen's has depreciation of $2,058,dividends paid of $125,interest expense of $382,an addition to retained earnings of $3,408,and an increase in common stock of $2,500.The total tax rate is 21 percent.What is the operating cash flow?
A)$6,460
B)$5,973
C)$5,325
D)$5,735
E)$6,408

Question

Quizplus · Accepted Answer

Operating cash flow can be calculated as follows:
Operating cash flow = Net income + Depreciation + Interest expense x (1 - Tax rate)
= [Addition to retained earnings - Increase in common stock - Dividends paid] + Depreciation + Interest expense x (1 - Tax rate)
= [3,408 - 2,500 - 125] + 2,058 + 382 x (1 - 0.21)
= $5,973

For the Year,Jensen's Has Depreciation of $2,058,dividends Paid of $125,interest