Question

Which of the following is the most accurate definition of operating cash flow (OCF) with interest and taxes?

(A) The amount of cash generated by a company's normal business operations, before interest and taxes are paid.
(B) The amount of cash generated by a company's normal business operations, after interest and taxes are paid.
(C) The amount of cash generated by a company's normal business operations, after interest is paid but before taxes are paid.
(D) The amount of cash generated by a company's normal business operations, before interest is paid but after taxes are paid.

Answer 1

The most accurate definition of operating cash flow (OCF) with interest and taxes is the amount of cash generated by a company's normal business operations, after interest and taxes are paid.

Step-by-step explanation:

The most accurate definition of operating cash flow (OCF) with interest and taxes is (B) The amount of cash generated by a company's normal business operations, after interest and taxes are paid.

Operating cash flow (OCF) represents the cash generated by a company's core business operations. By subtracting the interest and taxes paid from the cash generated, we can determine the true cash flow from the company's operations.

For example, if a company generates $1 million in cash from its operations, but pays $200,000 in interest and $300,000 in taxes, the operating cash flow with interest and taxes would be $500,000 ($1 million - $200,000 - $300,000). This represents the cash flow available for reinvestment or distribution to shareholders.