Your firm has the following income statement items: sales of $52,000,000;income tax of $1,880,000;operating expenses of $9,000,000;cost of goods sold of $36,000,000;depreciation and amortization of $1,500,000;and interest expense of $800,000.For purposes of determining free cash flow,what is the amount of the firm's after-tax cash flow from operations?

Question

Quizplus · Accepted Answer

After-tax cash flow from operations can be calculated as follows:
Sales - Cost of goods sold - Operating expenses - Depreciation and amortization = Earnings before interest and taxes (EBIT)
EBIT - Income tax = Net income
Net income + Depreciation and amortization = After-tax cash flow from operations
Using the provided figures:
$52,000,000 - $36,000,000 - $9,000,000 - $1,500,000 = $5,500,000 (EBIT)
$5,500,000 - $1,880,000 = $3,620,000 (Net income)
$3,620,000 + $1,500,000 = $5,120,000 (After-tax cash flow from operations)

Your Firm Has the Following Income Statement Items: Sales of $52,000,000;income