Please provide an explanation for the following A. During 2018, Fossil INC had sales of $600,000,...
Please provide an explanation for the following
A. During 2018, Fossil INC had sales of $600,000, cost of goods sold of $450,000, administrative and selling expenses of $95,000, depreciation expense of $140,000 and interest expense of $70,000. The tax rate is 35 percent. Ignore any tax loss carry back or carry forward provisions. What is the operating cash flow for Fossil?
B. If Fossil, Inc. has sales of 12,300, total assets of 13,000, a debt to equity ratio of 1.3 and a return on equity of 15 percent, what is Fossils net income?
Homework Answers
A: Sales = 600000
Less: Cost of goods sold = 450000
Selling and administrative expenses = 95000
Depreciation 140000
EBIT = -85000
Less tax = 35% = -29750
Operating income after tax = -55250
Add depreciation 140000
Operating cash flow = 84750
2: Debt to equity = 1.3/1
Hence debt = 1.3/2.3 of total assets
Equity = 1/2.3 of total assets
Equity = 13000*1/2.3=5652.174
ROE = 15% = Net Income/ Equity
Net Income = 15%*5652.174
= 847.83
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