A firm's operating cash flow (OCF) is defined as ________.
A) gross profit minus operating expenses
B) gross profit minus depreciation
C) EBIT times one minus the tax rate plus depreciation
D) EBIT plus depreciation

Question

Quizplus · Accepted Answer

The operating cash flow (OCF) of a firm is defined as EBIT (earnings before interest and taxes) times one minus the tax rate plus depreciation. This formula takes into account the profitability of the firm's operations (EBIT), the tax rate it faces, and the non-cash expense of depreciation. Therefore, Choice C is the correct answer. Choices A, B, and D do not include all the necessary components that make up the operating cash flow formula.

A Firm's Operating Cash Flow (OCF) Is Defined as ________