Fill in the missing numbers for the following income statement. Sales $ 691,900 Costs 446,800...

Question:

Fill in the missing numbers for the following income statement.

Sales $ 691,900
Costs 446,800
Depreciation 119,400
EBIT
Taxes (34%)
Net income

Calculate the OCF.

What is the depreciation tax shield?

Operating Cash flow and Depreciation tax shield:

Operating cash flow refers to the cash flow generated from the business operations of the company. Depreciation tax shield refers to the tax benefits arising due to charging depreciation as an expense.

Answer and Explanation:

The completed table is as follows:

Particulars Amount
Sales 691,900.00
Less: Costs 446,800.00
Les: Depreciation 119,400.00
EBIT 125,700.00
Less: Tax @ 34% 42,738.00
Net Income 82,962.00
Add: Depreciation 119,400.00
Operating Cash Flow 202,362.00

Depreciation tax shield = Depreciation amount x Tax Rate = 119,400 x 34% = $40,596.00


Learn more about this topic:

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Operating Cash Flow: Definition & Examples

from Finance 101: Principles of Finance

Chapter 10 / Lesson 4
10K

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