Question 6So Long, Inc, has sales of $334,000, costs of $145,400, depreciation expense of $63,200 andinterest 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 5Jingle Ltd. and Bell Ltd. belong to the same industry. A snapshot of some of their financialinformation is given below:Jingle Ltd. | Bell Ltd.3.2 :1Current ratio| Acid-test ratioDebt-Equity ratio|Times interest earned2:11.7:11.1:130%40%5You 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? Explainyour reasoning brieflyIf both companies could be facilitated, would you be willing to do so? Explainyour argument brieffly.ii)

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Answered: So Long, Inc, has sales of $334,000,…

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

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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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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.