Question

Sheryl’s Shipping had sales last year of $15,000. The cost of goods sold was $7,500, general and administrative expenses were $2,000, interest expenses were $1,500, and depreciation was $2,000. The firm’s tax rate is 30%.

a. What are the earnings before interest and taxes?

b. What is net income?

c. What is cash flow from operations?

Earnings before interest and taxes $ 1500

Net income $650

Cash flow from operations 1650

Operating cash flow is calculated by a relatively simple equation:EBIT (earnings before interest and taxes)+ Depreciation- Taxes.

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