Disturbed, Inc., had the following operating results for the past year: sales = $22,673; depreciation = $1,380; interest expense = $1,112; costs = $16,525. The tax rate for the year was 30 percent. What was the company's operating cash flow?

Operating cash flow is $3,939

Explanation:

Operating cash flows of a company can be calculated by adding non cash items to the net income earned for the year.

Sales                      $22,673

Costs                     ($16,525)

Gross Income        $6,148

Depreciation         ($1,380)

Interest expense  ($1,112)  

Income before tax $3,656

Tax 30%                 ($1,097)

Net Income             $2,559

Operating cash flows = Net income + non cash expenses

As we know the depreciation is a non cash expense, so we add it back to net income to calculate the operating cash flows.

Operating cash flows = $2,559 + $1,380 = $3,939

the answer is "b.the increased supply will create a surplus. "

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