Operating cash flow : Meaning, Formula and Example

Cash generated by the company’s everyday business operations is known as Operating cash flow. It is used to determine the amount of cash the normal operations are generating and to see whether or not outside cash is required to grow the company.

Formula for Operating cash flow

Operating cash flow= Net operating profit after taxes+Depreciation+Amortization

Example

JK Industries has Net operating profit after taxes of Rs.42,172, depreciation of Rs.400, and amortization Rs.120. This gives the company an operating cash flow of Rs.42,692.

Thus, if JK Industries has determined that it would need Rs.50,000 to grow the business to the next level, this helps to understand they approximately need Rs.7,300. (50000-42692).

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