# Calculate Net Operating Profit, Operating Cash Flow, and Free Cash Flow for Keith Corporation

## What are the formulas used to calculate Net Operating Profit, Operating Cash Flow, and Free Cash Flow for Keith Corporation?

Given the data from the income statement of Keith Corporation, how can we calculate the firm's financial performance metrics?

## Formulas for Calculating Net Operating Profit, Operating Cash Flow, and Free Cash Flow

To calculate Net Operating Profit After Taxes (NOPAT) for Keith Corporation, we use the formula: NOPAT = Operating Income x (1 - Tax Rate). Operating Cash Flow (OCF) is calculated as OCF = NOPAT + Depreciation - Current Taxes. While Free Cash Flow (FCF) is calculated with the formula: FCF = OCF - Net Capital Expenditure - Increase in Net Working Capital (NWC).

Net Operating Profit After Taxes (NOPAT) is an important financial metric that represents the profit generated from core operating activities. By deducting taxes from the operating income, we can determine the true profitability of the company.

Operating Cash Flow (OCF) is a crucial measure of a company's ability to generate cash from its operations. It takes into account depreciation and taxes to provide a comprehensive view of cash flow.

Free Cash Flow (FCF) indicates the amount of cash available to the company after accounting for capital expenditures and changes in working capital. A negative FCF suggests that the company may need to seek external funding to support its operations.