Fundamental analysis
Operating cash flow
Definition
Cash generated by the business itself over the period: net income adjusted for non-cash items, such as depreciation, and for changes in working capital.
Example
Say company XYZ reports net income of $40 million. Add back $15 million of depreciation, which reduced profit but used no cash, then subtract $10 million because customers owe the company that much more than a year earlier: operating cash flow is $45 million. If receivables kept ballooning year after year while profit rose, cash would trail earnings, a common warning sign.
Hypothetical numbers, for illustration only.
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