This is related to question 33-38 on EOC practice for reading 23, where the information gave us total operating cash flow already why did the answer went back to EBIT and calculate the operating cash flow based on EBIT (1-t)+D? whats the difference of those two, do we always have to calculate the after tax operating cash flow ourselves?
Operating cash flows in the sense of capital budgeting is before cost of debt (i.e. before interest expense). That’s why you need to calculate it yourself based on EBIT(1-t) +D (don’t forget the after tax salvage value also).
For financial reporting, operating cash flows usually include interest expense.
In both case, it is after tax.
omg, thanks, I wonder if the real test would go into such details…ahhhhhh