ii.  Operating Cash Flow

For an operator, operating cash flow can simply mean revenues minus expenses.  However, many debt financiers, for the purpose of assessing a project's ability to service debt, assess a project's cash flow based on earnings before interest, tax, depreciation and amortization (EBITDA).  This is in contrast to a project sponsor who will define net cash flow as earnings after tax (EAT) plus depreciation added back (see Box 3 -1 for a comparison of each).  This variation exists because debt financiers are interested in assessing the cash flow that goes directly to servicing debt, whereas equity financiers, like project sponsors, look at cash flow after tax in order to assess a project's return on equity (ROE).