Question

What if assets equal $6,900? b. 18. Net Income and OCF During the year, Belyk Paving Co. had sales of $2,275,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,285,000, $535,000, and $420,000, respectively. In addition, the company had an interest expense of $245,000 and a tax rate of 21 percent. (Ignore any tax loss carryforward provision and assume interest expense is fully deductible.) What is the company's net income? LO 2 a. b. What is its operating cash flow? c. Explain your results in parts (a) and (b). 19. Accounting Values versus Cash Flows In Problem 18, suppose Belyk Paving Co. paid out $370,000 in cash dividends. Is this possible? If net capital spending was zero, no new investments were made in net working capital, and no new stock was issued during the year, what do you know about the firm's long-term debt account? LO 2 Cale Prescott Football Manufacturing had the LElaue

Answer 1

A a) 2 Net Income Sales 3 2275000 4 Less: Cost of goods sold Administrative and selling expenses 1285000 535000 Depreciation expense 420000 8 EBIT 35000 Less: Interest expense 245000 10 EBT -210000 11 Less: Tax @ 21% Net income 12 -210000 13 b) 14 15 Operating cash flow = EBIT + Depreciation - tax %3D = $35,000 + $420,000 - 0 = $455,000. 16 17 18 c) 19 20 The company incures losses and no tax is supposed to be paid on losses. 21 The cash flow is good since the payments are less when compared to receipts. 22