# Hailey, Inc., has sales of $19,570, costs of$9,460, depreciation expense of $2,130, and interest... ## Question: Hailey, Inc., has sales of {eq}\$19,570 {/eq}, costs of {eq}\$9,460 {/eq}, depreciation expense of {eq}\$2,130 {/eq}, and interest expense of {eq}\$1,620 {/eq}. Assume the tax rate is {eq}35 \% {/eq}. What is the operating cash flow, or OCF? ## Operating Cash Flow: The cash flow statement is a critical part of the financial statements. The operating cash flow shows the cash generated from the core operations of the business. When a company has robust operating cash flows, capital expenditure can be funded through internal cash flows than a dilution of equity or leveraging. ## Answer and Explanation: . Given - • Sales =$19,570
• Cost = $9,460 • Depreciation =$2,130

Therefore,

• Earnings Before Interest and Tax = Sales - Cost - Depreciation
• Earnings Before Interest and Tax = 19,570 - 9,460 - 2,130
• Earnings Before Interest and Tax = $7,980 Interest Expense =$1,620

• Earnings Before Tax = Earnings Before Interest and Tax - Interest Expense
• Earnings Before Tax = 7,980 - 1,620
• Earnings Before Tax = $6,360 Tax Rate = 35% • Net Income = Earnings Before Tax * (1 - Tax Rate ) • Net Income = 6,360 * (1 - 0.35 ) • Net Income =$4,134

Once we have the net income, the operating cash flow can be calculated as follows -

• Operating Cash Flow = Net Income + Depreciation
• Operating Cash Flow = 4,134 + 2,130
• Operating Cash Flow = \$6,264