There are two formulas to calculate operating cash flow one is a direct method and the other is an indirect method. Operating cash flow is the first section on a cash flow statement.

### Cash flow from operating activities net income depreciation depletion amortization adjustments to net income changes in accounts receivables changes in liabilities changes in.

**How to calculate operating cash flow**. There are two different methods for depicting operating cash flow. Operating cash flow formula there are two methods you can use to calculate operating cash flow. Operating cash flow is an important number to evaluate the financial success of a company s core business activities.

While the direct method is the easiest and most accurate it requires reconciliation. There is a short and long version of the formula for calculating operating cash flow. 1 direct method ocf formula this method is very simple and accurate.

Operating cash flow net income all non cash expenses net increase in working capital. The simple operating cash flow formula is. Operating cash flow net income depreciation stock based compensation deferred tax other non cash items increase in accounts receivable increase in inventory increase in accounts payable increase in accrued expenses increase in deferred revenue.

Simple operating cash flow formula. To calculate fcf from the cash flow statement locate the item cash flow from operations also referred to as operating cash or net cash from operating activities and subtract the capital. The operating cash flow formula can be calculated two different ways.

Let s take a closer look at how to calculate operating cash flow. The first way or the direct method simply subtracts operating expenses from total revenues. Ocf is important because it indicates whether a company is able to generate sufficient positive cash flow to maintain and grow its operations or whether it may require external financing.

Cash flow from operations indirect method example. Operating cash flow ocf is a measure of the amount of cash generated by a company s normal business operations. This calculation is simple and accurate but does not give investors much information about the company its operations or the sources of cash.

The direct method and the indirect method. Cash flow from operations formula indirect method net income gains losses from financing investments non cash charges changes in operating accounts. Let us work through the same cash flow from operations example we used for using the direct approach.

Free Cash Flow Operating Cash Ratio Free Cash Cash Flow Cash