The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Variable costs will be $50,000, and rental costs for the shop are $30,000 a year. Depreciation on the repair tools will be $10,000. Prepare an income statement for the shop based on these estimates. The tax rate is 35%. Calculate operating cash flow for the year by using all three methods: (a) Dollars in minus dollars out; (b) Adjusted accounting profits; and (c) Add back depreciation tax shield. Operating Cash Flovw Method a. Dollars in minus dollars out b. Adjusted accounting profits c. Add back depreciation tax shield
Should all the above approaches result in the same value for cash flow.
a. Yes
b. No
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