Learn / Fundamentals / Cash flow / Operating Cash Flow
OCF ≈ Net Income + Non-cash − ΔWorking Capital (simplified teaching)
Operating cash flow asks how much cash the core business actually generated. It starts from profit, adds back non-cash charges, and adjusts for working-capital swings.
01 Feel it first
Start with $10 net income. Toggle depreciation and working-capital drain or release. Watch operating cash flow move while profit stays fixed.
02 Break the intuition
Profit can climb while operating cash falls. Reveal the gap.
03 Sort it
Tap each card. Sort it into cash that confirms the profit story or cash that lags behind.
Tap a card, then sort by cash vs profit quality.
Tap a card, then tap a bucket.
04 Build the formula
Tap chips to build the simplified bridge from net income to operating cash flow.
Start with $10 net income. Add back $2 depreciation (non-cash). Subtract $3 tied up in working capital. OCF ≈ $9. This is simplified teaching; real statements have more lines.
05 Two flavors
Operating cash flow is the engine before big equipment bills. Free cash flow is what is left after capex.
06 Quality check
When operating cash leads, matches, or lags net income.
07 Check yourself
08 Where it breaks
A big receivable collection or inventory drawdown can swing one quarter's OCF without changing the real trend.
Non-cash stock compensation is often added back, but it still dilutes owners. Cash can look healthier than economic reality.
Strong OCF with heavy capex still may leave little free cash. You need both views to judge spare cash.
For lenders, classic operating cash flow is a poor fit. Prefer industry-specific cash measures.
Open any ticker for OCF beside net income and free cash flow, then screen for cash that matches the earnings story.
OCF is cash from operations before big equipment spending. Free cash flow subtracts capex next.
Operating cash flow is the core engine. Free cash flow is what is left after capex keeps the asset base alive.