Knowledge (XXG)

Operating cash flow

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financing as well as depreciation, and amortization expenses are stripped out when calculating profitability. Thus, it can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures (which may also be deemed a
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Interest is a financing flow. It takes into consideration how the operations are financed or taxed. 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
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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.
64:. Operating activities include any spending or sources of cash that’s involved in a company’s day-to-day business activities. The International Financial Reporting Standards defines operating cash flow as cash generated from operations, less 72:
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.
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demerit of the EBITDA measure). It is also a useful metric for understanding a business’s ability to generate cash flow for its owners and for judging a company’s operating performance. The difference between
198: 189: 185: 182:; however, as depreciation is a non-cash expense the operating cash flow would provide a more accurate picture of the company's current cash holdings than the artificially low net income. 156:
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
291: 88: 171: 122: 174:. For example, a company with numerous fixed assets on its books (e.g. factories, machinery, etc.) would likely have decreased 331: 256: 192:
is a kind of operating income which excludes all non-operating and non-cash expenses. With it, factors like
17: 216: 153:: Variations of Assets Suppliers and Clients accounts will be disclosed in the Financial Cash Flow 336: 112: 97:− investment income (Profit on asset Sales, disclosed separately in Investment Cash Flow) 57: 221: 325: 179: 132: 313: 175: 167: 61: 53: 211: 302: 281:
International Accounting Standards 7, Cash Flow Statements (January 2007)
136: 69: 45: 41: 142:− financing expenses (disclosed separately in Finance Cash Flow) 193: 49: 37: 186:
Earnings before interest, taxes, depreciation and amortization
100:− other income that is non cash and/or non sales related 65: 292:
Ross, Fundamentals of Corporate Finance, 12th edition, 2019
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Ross, Stephen, Randolf Westerfield and Bradford Jordan
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Operating Cash Flow vs. Net Income, EBIT, and EBITDA
115:− Stock Variation = Purchase of goods. (2) 8: 303:Definition of depreciation via Wikinvest 233: 131:− non cash expense items such as 7: 251: 249: 30:cash flow from operating activities 14: 242:Fundamentals of Corporate Finance 36:(FCFO), refers to the amount of 26:cash flow provided by operations 314:Definition of OCF via Wikinvest 121:− increase (decrease) in 87:− increase (decrease) in 34:free cash flow from operations 1: 135:, provisioning, impairments, 353: 52:associated with long-term 48:it brings in, excluding 60:items or investment in 257:"Financial Dictionary" 166:profitability such as 332:Management accounting 118:+ all other expenses 76:Cash generated from 18:financial accounting 217:Cash flow statement 84:revenue as reported 44:generates from the 22:operating cash flow 92:trade receivables 344: 316: 311: 305: 300: 294: 289: 283: 278: 272: 271: 269: 268: 253: 244: 238: 352: 351: 347: 346: 345: 343: 342: 341: 322: 321: 320: 319: 312: 308: 301: 297: 290: 286: 279: 275: 266: 264: 255: 254: 247: 239: 235: 230: 208: 163: 12: 11: 5: 350: 348: 340: 339: 334: 324: 323: 318: 317: 306: 295: 284: 273: 245: 232: 231: 229: 226: 225: 224: 222:Free cash flow 219: 214: 207: 204: 162: 159: 158: 157: 154: 144: 143: 140: 129: 126:trade payables 119: 116: 113:costs of sales 102: 101: 98: 95: 85: 13: 10: 9: 6: 4: 3: 2: 349: 338: 335: 333: 330: 329: 327: 315: 310: 307: 304: 299: 296: 293: 288: 285: 282: 277: 274: 262: 258: 252: 250: 246: 243: 237: 234: 227: 223: 220: 218: 215: 213: 210: 209: 205: 203: 200: 195: 191: 187: 183: 181: 177: 173: 169: 160: 155: 152: 149: 148: 147: 141: 138: 134: 130: 127: 125: 120: 117: 114: 111: 110: 109: 107: 104:Cash paid to 99: 96: 93: 91: 86: 83: 82: 81: 79: 74: 71: 67: 63: 59: 55: 51: 47: 43: 39: 35: 31: 27: 23: 19: 309: 298: 287: 280: 276: 265:. Retrieved 263:. 2021-01-21 260: 241: 236: 184: 180:depreciation 164: 150: 145: 133:depreciation 123: 105: 103: 89: 77: 75: 33: 29: 25: 21: 15: 108:suppliers: 80:customers: 326:Categories 267:2021-02-24 228:References 176:net income 168:net income 62:securities 54:investment 337:Cash flow 212:Cash flow 151:Operating 137:bad debts 124:operating 106:operating 90:operating 78:operating 32:(CFO) or 206:See also 188:or just 70:interest 66:taxation 46:revenues 178:due to 58:capital 42:company 24:(OCF), 261:Kernel 199:EBITDA 190:EBITDA 146:Notes 139:, etc. 50:costs 194:debt 172:EBIT 68:and 38:cash 170:or 128:(1) 94:(1) 56:on 16:In 328:: 259:. 248:^ 40:a 28:, 20:, 270:.

Index

financial accounting
cash
company
revenues
costs
investment
capital
securities
taxation
interest
operating trade receivables
costs of sales
operating trade payables
depreciation
bad debts
net income
EBIT
net income
depreciation
Earnings before interest, taxes, depreciation and amortization
EBITDA
debt
EBITDA
Cash flow
Cash flow statement
Free cash flow


"Financial Dictionary"
Ross, Fundamentals of Corporate Finance, 12th edition, 2019

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