Operating Cash Flow

What is Operating Cash Flow?

Operating cash flow (OCF) measures the cash generated by a company's normal business operations. It is calculated by adding up all the cash inflows and subtracting all the cash outflows resulting from the company's operating activities. The resulting figure represents the net cash generated by the company's day-to-day business operations.

OCF is an important measure of a company's financial health, as it shows its ability to generate cash from its core business activities. It is used to evaluate the company's performance, as well as to forecast future cash flows and make investment decisions.

OCF is typically calculated using the direct method, which involves listing all the specific cash inflows and outflows resulting from a company's operating activities. Alternatively, OCF can also be calculated using the indirect method, which involves adjusting net income for the changes in non-cash items, such as depreciation and changes in working capital.

It is important to note that OCF does not include cash flows resulting from investing or financing activities, which are reported separately on the cash flow statement.

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