Help with income statement.....PLEASE.?

Question

EBITDA=$7.5 million and net income of $1.8 million. $2.0 million interest expense and corp. tax rate 40%. What was its charge for depreciation and amortization?

next one is $55,000 in cash at year end 2004 and $25000. cash at year end on 2005. cash flow from long term investing -$250,000. and cash flow from financing activities +$170,000. what was the cash flow from operating activities?

Answer 1

EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization
Listing down what we know and don't know, we have:
EBITDA 7,500,000
Interest (2,000,000)
D&A (?)
Sub-total (100%) ?
Tax (40%) (?)
Net income (60%) 1,800,000

Knowing that 60% of the sub-total = 1.8m, we now know that the sub-total = 100/60 x 1.8m = 3m and that tax = 40% x 3m = 1.2m. Knowing all this, it's quite easy to fill in the gap for D&A:
EBITDA 7,500,000
Interest (2,000,000)
D&A (2,500,000)
Sub-total (100%) 3,000,000
Tax (40%) (1,200,000)
Net income (60%) 1,800,000

So depn & amortization must be 2.5m

Coming to the cash flow problem, we list down what we know and don't know:
Cash flow from op'g activities ?
Cash flow used in investing activities (250,000)
Cash flow from financing activities 170,000
Net decrease in cash (30,000)*
Cash at beginning of yr 55,000
Cash at end of yr 25,000

Just using a calculator, we know that cash flow from op'g activities must = 50,000.

*We have cash at beginning and at end of yr, so the difference must be the decrease in cash for the year

Answer 2

Perfect explanation and walkthrough of the calculation from the first post by Sandy! The answers are 100% correct.