Which of the Following Statements Is CORRECT

question 32

Multiple Choice

Which of the following statements is CORRECT?

• A)Operating cash flow (OCF) is defined as follows: OCF = EBIT(1-T) - Depreciation and Amortization.
• B)Changes in working capital have no effect on free cash flow.
• C)Free cash flow (FCF) is defined as follows: FCF = EBIT(1 - T)
• + Depreciation and Amortization
• - Capital expenditures required to sustain operations
• - Required changes in net operating working capital.
• D)Free cash flow (FCF) is defined as follows: FCF = EBIT(1-T)+ Depreciation and Amortization + Capital expenditures.
• E)Operating cash flow is the same as free cash flow (FCF).

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Definitions:

Salvage Value

The projected residual worth of an asset after it has served its intended period.

Plant Assets

Long-term tangible assets used in the operation of a business that are not intended for resale, such as machinery, buildings, and land.

Year Ended

Refers to the end of a fiscal year, when a company completes its annual accounting period.

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption or wear and tear.