Operating Cash Flow

Operating Cash Flow shows how much actual cash a business generates from its daily operations, such as sales of goods or services.

It is a key indicator of a company’s liquidity and operational efficiency, as it focuses on real cash rather than accounting profits.

Formula (Simplified)

👉 OCF = Net Income + Non-Cash Expenses ± Changes in Working Capital

Where:

• Non-cash expenses include depreciation, amortization
• Working capital changes include inventory, receivables, payables

Why Operating Cash Flow Matters

• Indicates ability to sustain operations
• Helps assess financial health
• Used in valuation and analysis

OCF vs Net Profit

• OCF: Actual cash generated
• Net Profit: Accounting profit (may include non-cash items)

OCF vs Free Cash Flow

• OCF: Cash from operations
• FCF: OCF minus capital expenditure

"A company earns ₹10 lakh net income, adds ₹2 lakh depreciation, and adjusts ₹1 lakh working capital: 👉 OCF = ₹13 lakh"