Net Income and OCF During 2007, Raines Umbrella Corp. had sales of $840,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $625,000, $120,000, and $130,000, respectively. In addition, the company had an interest expense of $85,000 and a tax rate of 35 percent. (Ignore any tax loss carry-back or carry forward provisions.)

a. What is Raines’s net income for 2007?

b. What is its operating cash flow?

c. Explain your results in (a) and (b).