Definition
Operating cash flow (OCF) measures cash generated from normal business activities. It starts with net income and adjusts for non-cash items (depreciation) and working capital changes. Strong OCF indicates the business can fund operations without external financing.
Formula
OCF = Net Income + Depreciation + Changes in Working Capital
Example
Net income of $50M plus $20M depreciation minus $10M working capital increase equals $60M operating cash flow. The company generated $60M cash from operations.
FAQ
What is Operating Cash Flow?
Cash generated from core business operations.
How do you calculate Operating Cash Flow?
A common formula for Operating Cash Flow is: OCF = Net Income + Depreciation + Changes in Working Capital
Why is Operating Cash Flow important?
Operating Cash Flow helps investors evaluate financial statements and make more informed decisions.