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

The operating cash flow (OCF) of a project is calculated by subtracting the operating costs from the operating revenue. In this case, the operating revenue is given by the product of price (P) and quantity sold (Q) less the variable cost (v), which gives (P - v)(Q). From this amount, we then subtract the fixed costs (FC) and taxes (T) to arrive at the operating cash flow. Therefore, the correct formula for OCF is (P - v)(Q) - FC - T, as given in option C. Options A, B, D, and E include additional or erroneous terms that do not apply to the calculation of OCF.

The Operating Cash ﬂOw of a Project Can Be Expressed