During the year, Belyk Paving Company had sales of $1,745,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $880,000, $470,000, and $385,000, respectively. In addition, the company had an interest expense of $195,000 and a tax rate of 21 percent. (Ignore any tax loss carryforward provision and assume interest expense is fully deductible.)

Question

What is the company’s net income?
What is the company’s operating cash flow?

Answer 1

Net income = Sales - Cost of goods sold - Administrative and selling expenses - Depreciation expenses - Interest expense - Taxes
Net income = $1,745,000 - $880,000 - $470,000 - $385,000 - $195,000 - (0.21 * ($1,745,000 - $880,000 - $470,000 - $385,000 - $195,000))
Net income = $1,745,000 - $880,000 - $470,000 - $385,000 - $195,000 - $143,850
Net income = $335,150

Operating cash flow = Net income + Depreciation expenses
Operating cash flow = $335,150 + $385,000
Operating cash flow = $720,150

Therefore, the company's net income is $335,150 and its operating cash flow is $720,150.