When calculating operating cash flow for a project, one would calculate it as being mathematically equal to which of the following?
A) EBIT − Interest − Taxes + Depreciation
B) EBIT − Taxes
C) EBIT + Depreciation
D) EBIT − Taxes + Depreciation

Question

Quizplus · Accepted Answer

Operating cash flow for a project is calculated as EBIT (Earnings Before Interest and Taxes) minus Taxes plus Depreciation. This formula accounts for the cash operations of the business excluding financing costs and provides a clearer picture of the operational efficiency and cash-generating ability of the project. Depreciation is added back because it is a non-cash expense that reduces taxable income, thus affecting cash flow.

When Calculating Operating Cash Flow for a Project, One Would