Operating Cash Flow - OCF


DEFINITION of 'Operating Cash Flow - OCF'

Operating Cash Flow (or OCF) is a measure of the amount of cash generated by a company's normal business operations. Operating cash flow is important because it indicates whether a company is able to generate sufficient positive cash flow to maintain and grow its operations, or whether it may require external financing. OCF is calculated by adjusting net income for items such as depreciation, changes to accounts receivable and changes in inventory.


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BREAKING DOWN 'Operating Cash Flow - OCF'

Financial analysts sometimes prefer to look at cash flow metrics because it strips away certain accounting effects and is thought to provide a clearer picture of the current reality of the business operations. For example, booking a large sale provides a big boost to revenue, but if the company is having a hard time collecting the cash, then it is not a true economic benefit to the company. On the other hand, a company may be highly profitable on a cash flow basis, but may not have a low net income if it has a lot of fixed assets and uses accelerated depreciation calculations.

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  1. Why is a company's Cash Flow from Financing (CFF) important to both investors and ...

    A company's cash flow from financing activities (CFF) is important to investors and creditors because it depicts how much ... Read Full Answer >>
  2. What metrics are often used to evaluate companies in the drugs sector?

    Some of the equity valuation metrics that analysts and investors most commonly use to evaluate companies in the pharmaceutical ... Read Full Answer >>
  3. What are some ratios I can use the operating cash flow ratio with?

    While many ratios incorporate a company's operating cash flow, the most important financial ratios that include it are the ... Read Full Answer >>
  4. How is cash flow from operating activities calculated?

    Cash flow from operating activities can be calculated directly or indirectly. Either way, cash from operating activities ... Read Full Answer >>
  5. How does Free Cash Flow to the Firm (FCFF) measure money, time, and risk?

    Free cash flow to the firm, or FCFF, measures money and time through the use of short- and long-term assets and earnings ... Read Full Answer >>
  6. Why is EBITDA commonly used as a valuation metric for telecommunications companies?

    Earnings before interest, taxes, depreciation and amortization, or EBITDA, is a popular equity evaluation metric for analyzing ... Read Full Answer >>
  7. How can I invest in the corporate bond market without a lot of money to invest?

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  8. What does the operating cash flow ratio measure?

    The operating cash flow ratio measures a company's ability to meet its short-term, or current, liabilities, also known as ... Read Full Answer >>
  9. What is the difference between Operating Cash Flow and Net Operating Income (NOI)?

    Two metrics that investors look at in a company's financial statements are its net operating income and operating cash flow. ... Read Full Answer >>
  10. Why do analysts look at operating cash flow?

    Analysts look at operating cash flow when considering the financial health of a business entity. Insufficient cash flow may ... Read Full Answer >>
  11. Are taxes calculated in operating cash flow?

    Taxes are included in the calculations for the operating cash flow. Cash flow from operating activities is calculated by ... Read Full Answer >>
  12. How do you calculate operating cash flow in Excel?

    Calculating free cash flow is useful for investors and lenders to evaluate the success of a company. To create an Excel spreadsheet ... Read Full Answer >>
  13. What are some examples of how cash flows can be manipulated or distorted?

    When you review a company's balance sheet or income statement, you run into a breakdown of cash flow. Ostensibly, the cash ... Read Full Answer >>

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