QuestionJune 6, 2025

Kiara Freestyle has cost of goods sold of 95,211 interest expense of 4,608 dividends paid of 3,200 depreciation of 14,568 an increase in retained earnings of 11,920 and a tax rate of 21 percent. What is the operating cash flow? 31,543.10 42,122.42 36,462.58 34,296.00 36,741.42

Kiara Freestyle has cost of goods sold of 95,211 interest expense of 4,608 dividends paid of 3,200 depreciation of 14,568 an increase in retained earnings of 11,920 and a tax rate of 21 percent. What is the operating cash flow? 31,543.10 42,122.42 36,462.58 34,296.00 36,741.42
Kiara Freestyle has cost of goods sold of 95,211 interest expense of 4,608 dividends paid of
 3,200 depreciation of 14,568 an increase in retained earnings of 11,920 and a tax rate of 21
percent.
What is the operating cash flow?
 31,543.10
 42,122.42
 36,462.58
 34,296.00
 36,741.42

Solution
4.2(262 votes)

Answer

\ 34,296.00 Explanation 1. Calculate Net Income Use the formula: **Net Income = Increase in Retained Earnings + Dividends Paid**. So, 11,920 + 3,200 = 15,120. 2. Calculate Earnings Before Tax (EBT) Use the formula: **EBT = \frac{\text{Net Income}}{1 - \text{Tax Rate}}**. So, \frac{15,120}{1 - 0.21} = 19,139.24. 3. Calculate Earnings Before Interest and Taxes (EBIT) Use the formula: **EBIT = EBT + Interest Expense**. So, 19,139.24 + 4,608 = 23,747.24. 4. Calculate Operating Cash Flow (OCF) Use the formula: **OCF = EBIT + Depreciation - Taxes**. First, calculate taxes: EBT \times \text{Tax Rate} = 19,139.24 \times 0.21 = 4,019.24. Then, OCF: 23,747.24 + 14,568 - 4,019.24 = 34,296.00.

Explanation

1. Calculate Net Income<br /> Use the formula: **Net Income = Increase in Retained Earnings + Dividends Paid**. So, $11,920 + 3,200 = 15,120$.<br /><br />2. Calculate Earnings Before Tax (EBT)<br /> Use the formula: **EBT = \frac{\text{Net Income}}{1 - \text{Tax Rate}}**. So, $\frac{15,120}{1 - 0.21} = 19,139.24$.<br /><br />3. Calculate Earnings Before Interest and Taxes (EBIT)<br /> Use the formula: **EBIT = EBT + Interest Expense**. So, $19,139.24 + 4,608 = 23,747.24$.<br /><br />4. Calculate Operating Cash Flow (OCF)<br /> Use the formula: **OCF = EBIT + Depreciation - Taxes**. First, calculate taxes: $EBT \times \text{Tax Rate} = 19,139.24 \times 0.21 = 4,019.24$. Then, OCF: $23,747.24 + 14,568 - 4,019.24 = 34,296.00$.
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