So Long, Inc, has sales of $334,000, costs of $145,400, depreciation expense of S63,200 and interest expense of $22,300. If the tax rate is 35%, (a) What is the operating cash flow or OCF? (b) Explain why interest paid is not a component of operating cash flow.
So Long, Inc, has sales of $334,000, costs of $145,400, depreciation expense of S63,200 and interest expense of $22,300. If the tax rate is 35%, (a) What is the operating cash flow or OCF? (b) Explain why interest paid is not a component of operating cash flow.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter6: Accounting Quality
Section: Chapter Questions
Problem 3DIC
Related questions
Question
![Question 6
So Long, Inc, has sales of $334,000, costs of $145,400, depreciation expense of $63,200 and
interest expense of $22,300. If the tax rate is 35%,
(a) What is the operating cash flow or OCF?
(b) Explain why interest paid is not a component of operating cash flow.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fad0ac84e-0550-43a0-af29-56c9639f04a2%2F03dcfdcf-98ac-4b5e-92aa-11cfce0e9257%2F9urd0rd_processed.png&w=3840&q=75)
Transcribed Image Text:Question 6
So Long, Inc, has sales of $334,000, costs of $145,400, depreciation expense of $63,200 and
interest expense of $22,300. If the tax rate is 35%,
(a) What is the operating cash flow or OCF?
(b) Explain why interest paid is not a component of operating cash flow.
![Question 5
Jingle Ltd. and Bell Ltd. belong to the same industry. A snapshot of some of their financial
information is given below:
Jingle Ltd. | Bell Ltd.
3.2 :1
Current ratio
| Acid-test ratio
Debt-Equity ratio
|Times interest earned
2:1
1.7:1
1.1:1
30%
40%
5
You are a loans officer and both companies have asked for an equal 2-year loan.
i)
If you could facilitate only one loan, which company would you refuse? Explain
your reasoning briefly
If both companies could be facilitated, would you be willing to do so? Explain
your argument brieffly.
ii)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fad0ac84e-0550-43a0-af29-56c9639f04a2%2F03dcfdcf-98ac-4b5e-92aa-11cfce0e9257%2F455msmhd_processed.png&w=3840&q=75)
Transcribed Image Text:Question 5
Jingle Ltd. and Bell Ltd. belong to the same industry. A snapshot of some of their financial
information is given below:
Jingle Ltd. | Bell Ltd.
3.2 :1
Current ratio
| Acid-test ratio
Debt-Equity ratio
|Times interest earned
2:1
1.7:1
1.1:1
30%
40%
5
You are a loans officer and both companies have asked for an equal 2-year loan.
i)
If you could facilitate only one loan, which company would you refuse? Explain
your reasoning briefly
If both companies could be facilitated, would you be willing to do so? Explain
your argument brieffly.
ii)
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