Chevelle, Inc., has sales of $40,000, costs of $20,000, depreciation expense of $1,500, and interest expense of $800.

If the tax rate is 35 percent, what is the operating cash flow, or OCF?

Operating cash flow

$

Explanation:

To calculate OCF, we first need the income statement:

   

Income Statement
Sales	$	40,000
Costs		20,000
Depreciation		1,500
EBIT	$	18,500
Interest		800
Taxable income	$	17,700
Taxes (35%)		6,195
Net income	$	11,505

    OCF = EBIT + Depreciation – Taxes = $18,500 + 1,500 – 6,195 = $13,805