Dictionary / Financial statements
What Is Operating Cash Flow?
Operating cash flow is the cash a company brings in from its everyday business. It is the first section of the cash flow statement.
How it is worked out
Start with net income. Add back costs that use no cash, like depreciation. Then adjust for cash tied up in unpaid customer bills or inventory, and cash not yet paid to suppliers.
Why it can differ from profit
A company that sells on credit books the sale now but gets the cash later. One that collects cash upfront, like a subscription business, can have more cash than profit.
Why it matters
Bills, wages and dividends are paid with cash, not profit. Operating cash flow minus capital expenditure gives free cash flow. A company that shows profit but weak operating cash flow deserves a closer look.
See it in real companies
Open a company to see what it sells and how it makes money.