A firm in the third year of depreciating its only asset, which originally cost $180,000, and has a 5 year MACRS recovery period, has gathered the following data relative to the current year's operations:

Accruals $15,000

Current Assets 120,000

Interest expense 15,000

Sales Revenue 400,000

Inventory 70,000

Total Costs before depreciation, interest , and taxes 290,000

Tax rate on ordinary income 40%

a. Use the relevant data to determine the operating cash flow for the current year.

b. Explain the impact that depreciation, as well as any other noncash charges, has on a firm's cash flows.