During the year, the Senbet Discount Tire Company had gross sales of $1.24 milli

Question

During the year, the Senbet Discount Tire Company had gross sales of $1.24 million. The firm’s cost of goods sold and selling expenses were $543,000 and $233,000, respectively. The firm also had notes payable of $980,000. These notes carried an interest rate of 8 percent. Depreciation was $148,000. The firm’s tax rate was 40 percent. a. What was the firm’s net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.) Net income $ b. What was the firm’s operating cash flow? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.) Operating cash flow $

Explanation / Answer

Sales $          1,240,000 Less: Costs $              776,000 543000+233000 Depreciation $              148,000 EBIT $              316,000 Less: Interest $                78,400 980000*0.08 Profit before tax (PBT) $              237,600 Less: Tax @40% $                95,040 Net income $              142,560 Add: Depreciation $              148,000 Add: Interest $                78,400 Operating cash flows (OCF) $              368,960

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