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How to calculate a cash flow?
In a particular year, a firm has revenues of $6,500, cash expenses of $4,000, and depreciation charges of $1,500. If the tax rate is 30%, what is the firm's cash flow from operations for that year?
I ended up getting $2,500 because I did not include the Depreciation charges. But this is confusing me because
6500-4000=2500
Then I would usually do 2500- (.30*1500) = $2050
but it is not one of my options
2 Answers
- JKRBLv 78 years agoFavorite Answer
6,500 Revenues
- 4,000 cash expenses
- 1,500 depreciation
= $1,000 income before taxes
- 300 (1,000 x 30%) Taxes
= $700 net income
+ $1,500 depreciation (non-cash item)
= $2,200 cash flow from operations
Source(s): Accounting Fan - Anonymous6 years ago
very confusing situation. lookup on to google. that will will help!
