1. What is Operating Cash Flow?

Operating Cash Flow (OCF) measures the cash generated from a company's normal business operations. It indicates whether a company can generate sufficient positive cash flow to maintain and grow its operations.

2. How Does the Calculator Work?

The calculator uses the OCF formula:

Where:

• \( EBIT \) — Earnings Before Interest and Taxes
• \( Depreciation \) — Non-cash expense for asset wear and tear
• \( Taxes \) — Cash taxes paid
• \( \Delta Working\ Capital \) — Change in working capital (current assets - current liabilities)

Explanation: This formula adjusts accounting earnings for non-cash items and changes in working capital to determine actual cash generated from operations.

3. Importance of OCF Calculation

Details: Operating cash flow is a key indicator of financial health, showing a company's ability to generate cash from core operations, fund investments, pay dividends, and service debt without external financing.

4. Using the Calculator

Tips: Enter all values in the same currency unit. EBIT, Depreciation, and Taxes should be positive values. ΔWorking Capital can be positive or negative depending on whether working capital increased or decreased.

5. Frequently Asked Questions (FAQ)

Q1: Why is OCF important for investors?
A: OCF shows the actual cash a company generates, which is more reliable than accounting profits that can be influenced by non-cash items and accounting policies.

Q2: What's the difference between OCF and net income?
A: Net income includes non-cash expenses and changes in working capital, while OCF adjusts for these to show actual cash flow from operations.

Q3: Can OCF be negative?
A: Yes, negative OCF indicates a company is spending more cash than it's generating from operations, which may require external financing.

Q4: How often should OCF be calculated?
A: OCF should be calculated quarterly and annually as part of regular financial analysis and reporting.

Q5: What factors can affect OCF?
A: Revenue growth, profit margins, inventory management, accounts receivable collection, and accounts payable terms all significantly impact operating cash flow.