Explain how to compute an operating cash flow (OCF) from a modified in

Explain how to compute an operating cash flow (OCF) from a modified income statement.

What will be an ideal response?

 

 

ANSWER

Answer: We first compute EBIT, which is Revenues – Costs of Goods Sold – General Selling and Administrative Expenses – Depreciation. We then subtract Taxes to get Modified Net Income. Next, add back Depreciation to get Operating Cash Flow. Thus, .

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