Operating Cash Flow
Cash generated by a company's core business operations, before accounting for investing or financing activities.
What is Operating Cash Flow?
Operating cash flow (OCF), also called cash flow from operations (CFO), is the cash a company generates from its primary business activities — selling products and services — after accounting for working capital changes. It differs from net income because it adds back non-cash charges like depreciation and amortization and adjusts for changes in accounts receivable, inventory, and accounts payable. OCF is considered a more reliable measure of business health than earnings because it is harder to manipulate through accounting choices. Strong companies generate OCF consistently above their net income. Free cash flow equals OCF minus capital expenditures.
Example
Microsoft reported FY2024 net income of $88 billion, but operating cash flow of $119 billion. The difference arises because Microsoft added back $14 billion in depreciation/amortization (non-cash) and benefited from working capital changes including deferred revenue growth. The $119 billion OCF means Microsoft generated over $119 billion in actual cash from its business — before spending on acquisitions or capital expenditures.
Source: Microsoft Annual Report FY2024