Thanks for providing your input everyone on a firm\'s social responsibility! Com

Question

Thanks for providing your input everyone on a firm's social responsibility! Companies have to remember that customer loyalty comes when a good reputation exists and therefore being socially responsible and ethical is important to the success of a business. Good job! Let's move on. Class, here is a problem:
Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows:
Cost of goods sold............................... $1.2 million
Administrative expenses........................ $250,000
Marketing and selling expenses............... $175,000
Depreciation........................................ $500,000
Interest expense.................................. $200,000
Dividends paid..................................... $150,000
Assuming a tax rate of 30%, what is the operating cash flow for the year?

Explanation / Answer

Sales = $2.7 million = $2,700,000 Cost = $1200000 + $250000 + $175000 + $500000 + $200000 + $150000 = $2,475,000 Net profit = $2,700,000 - $2,475,000 = $2,25,000 Tax = 30% of profit = 30/100 x$2,25,000 = $67,500 Thus, operating cash flow for the year = $2,25,000 - $67,500 = $1,57,500

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