What Is Operating Cash Flow (OCF)?

Question 1

cash generated by a company’s normal business operations. It helps determine whether a company generates sufficient positive cash flow to maintain and grow its operations, without external financing.

Answer 1

Operating cash flow (OCF)

Question 2

measure the inflows and outflows related to a company’s main business activities, such as selling and purchasing inventory, providing services, and paying salaries. Any investing and financing transactions, such as borrowing, buying capital equipment, and making dividend payments are excluded.

Answer 2

Operating cash flow (OCF)

Question 3

the first section on a cash flow statement, showing cash from investing and financing activities.

Answer 3

Operating cash flow (OCF)

Question 4

calculated using an indirect or direct method.

Answer 4

Operating cash flow (OCF)

Question 5

begins with net income from the income statement and then adds non-cash items to arrive at a cash basis figure.

Answer 5

indirect method

Question 6

tracks all transactions in a period on a cash basis and uses actual cash inflows and outflows on the cash flow statement.

Answer 6

direct method

Question 7

represents the cash impact of a company’s net income (NI) from its primary business activities. Operating cash flow—also referred to as cash flow from operating activities—is the first section of the cash flow statement.

Answer 7

Operating cash flow (OCF)

Question 8

represents a company’s ability to pay its debts with its existing cash flows.

Answer 8

Operating Cash Flow Ratio

Question 9

determined by dividing operating cash flow by current liabilities.

Answer 9

Operating Cash Flow Ratio

Question 10

A ratio greater than 1.0 indicates that

Answer 10

a company is in a strong position to pay its debts without incurring additional liabilities.