Operating Cash Flow - OCF

AAA

DEFINITION of 'Operating Cash Flow - OCF'

In accounting, 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.

INVESTOPEDIA EXPLAINS '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.

VIDEO

RELATED TERMS
  1. Earnings Before Interest & Tax ...

    An indicator of a company's profitability, calculated as revenue ...
  2. Operating Cash Flow Margin

    A measure of the money a company generates from its core operations ...
  3. Operating Expense

    A category of expenditure that a business incurs as a result ...
  4. Operating Income

    The amount of profit realized from a business's operations after ...
  5. Net Operating Income - NOI

    A company's operating income after operating expenses are deducted, ...
  6. Non-Operating Cash Flows

    Cash flows (inflows and outflows) that are not related to the ...
Related Articles
  1. Analyze Cash Flow The Easy Way
    Fundamental Analysis

    Analyze Cash Flow The Easy Way

  2. Operating Cash Flow
    Investing

    Operating Cash Flow

  3. The Essentials Of Corporate Cash Flow ...
    Retirement

    The Essentials Of Corporate Cash Flow ...

  4. Operating Cash Flow: Better Than Net ...
    Markets

    Operating Cash Flow: Better Than Net ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center