Operating Cash Flow

How to read it

Operating cash flow is the reported total of the operating section of the cash flow statement. It starts from net income, adds back non-cash charges such as depreciation, amortization and stock-based pay, and adjusts for changes in working capital. It rises when profits grow or when the company collects from customers faster and pays suppliers slower, and it falls when inventory and receivables build up. stockrow shows it for the trailing twelve months, for quarters and for years, in millions in statement tables.

What is typical

How much cash operations produce relative to sales and profits depends on the kind of business. Subscription and software companies that bill in advance often collect cash before they book revenue, while manufacturers and retailers tie up cash in inventory. The line feeds many measures on stockrow, including Free Cash Flow, Free Cash Flow Margin, Income Quality, Operating Cash Flow Margin, the cash-flow valuation ratios and the Piotroski F-Score; compare those with the sector medians rather than the raw amount.

Pitfalls

Working capital can swing the figure sharply from one quarter to the next, so a single strong quarter may only reflect delayed payments to suppliers. Operating cash flow is measured before capital spending, so a business can show healthy operating cash flow and still consume cash once investment is counted.