During the year, Belyk Paving Co. had sales of $2,387,000. Cost of goods sold, a

Question

During the year, Belyk Paving Co. had sales of $2,387,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,438,000, $436,300, and $491,300, respectively. In addition, the company had an interest expense of $216,300 and a tax rate of 40 percent (ignore any tax loss carryback or carryforward provisions.). Belyk Paving Co. paid out $384,000 in cash dividends. Assume that net capital spending was zero, no new investments were made in net working capital, and no new stock was issued during the year. Calculate the firms new long term debt added during the year

Explanation / Answer

Operating Cash Flow = EBIT + Depreciation - Taxes
Ebit = Earnings before interest and taxes.

Now for your assignment..
$2,387,000 -- Sales
$1,438,000 -- Cost of goods sold(COGS)
$491,300-A&S expenses
$384,000 -- Depreciation
$216,300 -- Interest expense
Taxes=25%

So, by the formula:
Sales - COGS - A&S expenses = EBIT + Depreciation = $457,700
Taxes = 40% * $457,700 = $114,425

Operating cash flow = $343,275

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