I am not understanding how to obtain the OCF. I know that you have to add the depreciation expense and subtract the tax, but I am very confused. I know that you must divide the current assets by the current liabilities but when I do it, it doesn't work. Please help.
Hammett, Inc., has sales of $19,720, costs of $9,310, depreciation expense of $1,980, and interest expense of $1,470. Assume the tax rate is 40 percent.
What is the current ratio? Round your answer to 2 decimal places (e.g., 3.16).
What is the quick ratio? Round your answer to 2 decimal places (e.g., 3.16).
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What is the operating cash flow?
-- The operating cash flow = earnings before interest and income taxes + depreciation
minus income taxes.
19720 - 9310 - 1980 - 1470 = 6960 x 40% = 2784. <-- this gives you their net income and income tax expense. The net income = sales - expenses - depreciation - interest expense. The total of sales ...
Solution Summary
This solution shows the student how to calculate operating cash flow, the current ratio, and the quick ratio based on the information given.
... the statement of cash flow, any cash from customers ... A ratio is a numerical expression of the ... there are five major categories of ratios: Profitability ratios...
... Based on the given balance sheets, calculate the following financial ratios for each year (Do not include the ... Long-term debt ratio. ... Statement of Cash Flows. ...
... important ratio (for said company) from each category. State the reason why these ratios are important for your chosen company. Why is cash flow considered the ...
... on the invested capital, operating cash flow/profit growth and ... The lower ratio indicates less risk for the ... The risk management ratios, measures the company's ...
... 150000 =B41 =C33+C39+C42 20000 =C43+C44 Effect on cash flow Net effect ...ratio 8 times interest earned 1.4 current ratio 1 quick ratio 0.2 cash ratio 0.18 ROA ...
... Think back to some of the ratios that you ... What about the statement of cash flows, would this be ... and interest coverage rates, debt to assets ratio and interest ...
... invested capital, operating cash flow/profit growth and earnings per share. Financial Ratios Financial Ratios, such as the times interest earned ratio, the net ...
