A certain company has sales of $500,000, costs of $350,000, depreciation expense of $30,000 and a...

A certain company has sales of $500,000, costs of $350,000, depreciation expense of $30,000 and a tax rate of 21% Sarah has computed operating cash flow to be $124,800. Which of the following is false?

a) sarah's answer is correct

b)sarah's answer is off by $30,000

c) sarah could have used any of the methods to compute operating cash flow

d) sarah would have gotten the same answer using any of the methods.

e)none of the above is false.

Expert Solution

The statement which is false is Sarah's answer is off by $30,000.

Calculation of Net Income

Sales	$ 5,00,000
Cost	$ 3,50,000
Depreciation	$ 30,000
EBIT	$ 1,20,000
Less Tax @21%	$ 25,200
Net Income	$ 94,800

Operating Cashflow

Net Income	$ 94,800
Add- Non- Cash Income	$ 30,000
Operating Cashflow	$ 1,24,800

Thus, Sarah's answer is off by $30,000 is incorrect or false statement

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jeff jeffy answered 1 year ago

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