In financial accounting, operating cash flow (OCF), cash flow provided by operations or cash flow from operating activities (CFO), refers to the amount of cash a company generates from the revenues it brings in, excluding costs associated with long-term investment on capital items or investment in securities. The International Financial Reporting Standards defines operating cash flow as cash generated from operations less taxation and interest paid, investment income received and less dividends paid gives rise to operating cash flows. 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.
Cash generated from operating customers
- revenue as reported
- - increase (decrease) in operating trade receivables (1)
- - investment income (Profit on asset Sales, disclosed separately in Investment Cash Flow)
- - other income that is non cash and/or non sales related
Cash paid to operating suppliers
- costs of sales- Stock Variation = Purchase of goods. (2)
- + all other expenses
- - increase (decrease) in operating trade payables (1)
- - non cash expense items such as depreciation, provisioning, impairments, bad debts, etc.
- - financing expenses (disclosed separately in Finance Cash Flow)
(1): operating: Variations of Assets Suppliers and Clients accounts will be disclosed in the Financial Cash Flow
(2): Cost of Sales = Stock Out for sales. It is Cash Neutral. Cost of Sales - Stock Variation = Stock out - (Stock out - Stock In)= Stock In = Purchase of goods: Cash Out
Read more about Operating Cash Flow: Operating Cash Flow Vs. Net Income, EBIT, and EBITDA
Famous quotes containing the words operating, cash and/or flow:
“I think there are innumerable gods. What we on earth call God is a little tribal God who has made an awful mess. Certainly forces operating through human consciousness control events.”
—William Burroughs (b. 1914)
“Better eight hundred in cash than a thousand on credit.”
—Chinese proverb.
“Parents ought, through their own behavior and the values by which they live, to provide direction for their children. But they need to rid themselves of the idea that there are surefire methods which, when well applied, will produce certain predictable results. Whatever we do with and for our children ought to flow from our understanding of and our feelings for the particular situation and the relation we wish to exist between us and our child.”
—Bruno Bettelheim (20th century)