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In [[financial accounting]], '''operating cash flow''' (OCF), '''cash flow provided by operations''' or '''cash flow from operating activities''',aStatements refers(January to the amount of [[cash]] a [[company]] generates from the [[revenue|revenues]] it brings in, excluding [[cost|costs]] associated with long-term [[investment]] on [[Financial capital|capital]] items or investment in [[securities]].<ref>Ross, Stephen, Randolf Westerfield and Bradford Jordan '''Fundamentals of Corporate Finance2007)'''</ref>
Operating cash flow = Cash generated from operations less taxation and interest paid, investment income received and less dividends paid gives rise to operating cash flows per International Financial Reporting Standards.<ref> International Accounting Standards 7, Cash Flow Statements (January 2007)'''</ref>
To calculate cash generated from operations, one must calculate cash generated from customers and cash paid to suppliers. The difference between the two reflects cash generated from operations.
*- increase (decrease) in [[accounts receivable|trade receivables]]
*- investment income (disclosed separately)
*- other income that is non cash and non sales related
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Cash paid to suppliers
*[[cost of goods sold|costs of sales]]
*+ other expenses as reported less
*- increase (decrease) in [[accounts payable|trade payables]]
*- non cash items such as [[depreciation]], provisioning, impairments, [[bad debt|bad debts]], etc.
*- financing expenses
==Operating Cash Flow vs. [[Net Income]], [[Earnings before interest and taxes|EBIT]], and [[EBITDA]]==
Since it adjusts for liabilities, receivables, and depreciation, operating cash flow is a more accurate measure of how much cash a company has generated (or used) than traditional measures of profitability such as [[net income]] or [[Earnings before interest and taxes|EBIT]]. For example, a company with numerous fixed assets on its books (e.g. factories, machinery, etc.) would likely have decreased [[net income]] due to [[depreciation]]; however, as depreciation is a non-cash expense<ref>[[wikinvest:depreciation|Definition of depreciation via Wikinvest]]</ref> the operating cash flow would provide a more accurate picture of the company's current cash holdings than the artificially low net income.<ref>[[wikinvest:Operating Cash Flow|Definition of OCF via Wikinvest]]</ref>
Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability based on net working capital. The difference between EBITDA and OCF would then reflect how the entity finances its net working capital in the short term. OCF is not a measure of free cash flow and the effect of investment activities would need to be considered to arrive at the free cash flow of the entity.
== See also ==
*[[EBITDA]]
*[[Cash flow]]
*[[Cash flow statement]]
*[[Free cash flow]]
*[[wikinvest:Operating Cash Flow| Operating Cash Flow at Wikinvest]]
==References==
<references/>
{{accounting-stub}}
[[de:Operating Cash Flow]]
[[Category:Management accounting]]
[[Category:Cash flow]]
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