Question

During the year, Belyk Paving Co. had sales of $2,395,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,430,000, $435,500, and $490,500, respectively. In addition, the company had an interest expense of $215,500 and a tax rate of 40 percent. (Ignore any tax loss carryback or carryforward provisions.)

A) What is the company’s net income?

Net income=

B) What is it's operating cash flow?

Operating cash flow=

Answer 1

Ans.A	Sales		2395000
	Less: Cost of goods sold		-1430000
	Gross margin		965000
	Less: Operating expenses
	Administrative and selling expenses	-435500
	Depreciation expenses	-490500	-926000
	Operating income (EBIT)		39000
	Less: Interest expenses		-215500
	Earnings before tax		-176500
	Less: Tax		0
	Net income		-176500
	*The Tax will be zero because we are ignoring any tax loss carryback or carryforward.
Ans.B	Operating cash flow   =   EBIT + Depreciation
	39000 + 490500
	529500