Question

During the year, the Senbet Discount Tire Company had gross sales of $1.07 million. The company’s cost of goods sold and selling expenses were $576,000 and $229,000, respectively. The company also had notes payable of $680,000. These notes carried an interest rate of 4 percent. Depreciation was $106,000. The tax rate was 21 percent. a. What was the company’s net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.) b. What was the company’s operating cash flow? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.)

Answer 1

a.

Sales	$1,070,000
Cost of goods sold	$576,000
Selling costs	$229,000
Depreciation	$106,000
EBIT	$159,000
Interest	$27,200
Taxable income	$131,800
Taxes (21%)	$27,678
Net income	$104,122

b. OCF = EBIT + Depreciation – Taxes

OCF = $159,000 + $106,000 – $27,678

OCF = $237,322