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Operating cash flow

The cash a company's day-to-day business brings in during a period. It starts from net income, adds back non-cash costs such as depreciation, and adjusts for cash tied up in or released from working capital.

Simple example

A company has $50 of net income and $20 of depreciation, and $10 more is tied up in unpaid customer invoices. Its operating cash flow is $50 + $20 − $10 = $60.

$50Net income+$20Depreciation−$10Tied up ininvoices$60Operatingcash flow
Made-up numbers, for illustration only.

Related terms

Free cash flowOperating cash flow minus capital expenditures.Working capitalCash tied up in stock and unpaid invoices, minus unpaid bills.Net incomeThe profit left after all costs, interest and taxes.