The operating cash flow is the amount of cash generated by a business, for a specific period, through its normal operating activities within a particular period. Meet the business' needs for financing activities, including interest and debt payments, paying dividends or repurchasing shares from stakeholders Have sufficient capital for future business growth through investment activities The operating cash flow shows whether the core business activities produce sufficient cash flow for the business to: The calculation of OCF excludes financing and investment activities. The purpose of operating cash flow is to separate and evaluate the health of the business' core operations. Related: What Is Operating Cash Flow? Purpose of operating cash flow This article considers the purpose of operating cash flow, the formula for calculating it and includes an example of an operating cash flow calculation. A negative operating cash flow means that the company needs to borrow (financing activity) or raise additional capital (investment activity) to continue meeting its financial obligations. A business needs a positive operating cash flow to remain solvent in the long term. Operating cash flow is a critical indicator of the health of a business' core activities or operations. Operating cash flow is part of the business' cash flow statement, which contains different sections for all the company's cash flow, including the cash flows of its operating, investing and financing activities. The operating cash flow (OCF) is the cash generated from the normal operations of a business.
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