The operating cash flow of a project can be expressed as:
A) (P - v)(Q) - FC - D - T.
B) (P - v)(Q) - FC + D - T.
C) (P - v)(Q) - FC - T.
D) (P - v)(Q) - FC + T.
E) (P - v)(Q) - VC - T.

Question

Quizplus · Accepted Answer

Operating cash flow (OCF) of a project is typically calculated as: OCF = (Sales Revenue - Operating Costs - Depreciation) * (1 - Tax Rate) + Depreciation. However, none of the options provided exactly match this formula. The closest approximation given the options would be C) (P - v)(Q) - FC - T, where (P - v)(Q) represents the sales revenue minus variable costs (essentially gross profit), and FC could be seen as fixed costs, which are part of operating costs. However, this simplification omits the tax adjustment and depreciation, indicating none of the options perfectly align with the standard calculation. Option C is chosen as it most closely resembles the concept of subtracting costs from revenue, though it inaccurately represents tax treatment and depreciation.

The Operating Cash Flow of a Project Can Be Expressed