Net Income and OCT During 2015, rainbow umbrella corp. had sales of$590,000 cost
ID: 2335929 • Letter: N
Question
Net Income and OCTDuring 2015, rainbow umbrella corp. had sales of$590,000 cost of goods sold, administrative and selling expenses and depreciation expenses were $455,000, $85,000 and $125,000, respectively. In addition, the company had an interest expense of $65,000 and a tax rate of 35% (ignore any tax loss carry back or carry forward provisions) A. What is the company’s net income for 2015? B. What is it’s operating cash flow? C. Explain your result in (a) and (b) Net Income and OCT
During 2015, rainbow umbrella corp. had sales of$590,000 cost of goods sold, administrative and selling expenses and depreciation expenses were $455,000, $85,000 and $125,000, respectively. In addition, the company had an interest expense of $65,000 and a tax rate of 35% (ignore any tax loss carry back or carry forward provisions) A. What is the company’s net income for 2015? B. What is it’s operating cash flow? C. Explain your result in (a) and (b) Net Income and OCT
During 2015, rainbow umbrella corp. had sales of$590,000 cost of goods sold, administrative and selling expenses and depreciation expenses were $455,000, $85,000 and $125,000, respectively. In addition, the company had an interest expense of $65,000 and a tax rate of 35% (ignore any tax loss carry back or carry forward provisions) A. What is the company’s net income for 2015? B. What is it’s operating cash flow? C. Explain your result in (a) and (b)
Explanation / Answer
A Income Statement Sales 590,000 Less:COGS 455,000 Administrative and selling expenses 85,000 depriciation 125,000 EBIT -75,000 Interest -65,000 Taxable Income -140,000 Taxes (35%) 0 Net Income -140,000 b operating cash flow OCF = EBIT + Depreciation – Taxes -75000+125000-0 50,000 c Net income is negative because of depriciation and taxes.Actual Cash flow from operations is positive i.e 50000 as depriciation is a non cash expense and taxes is a financing expense