Answer / bharathi avvari

Operating Cash Flow compares the difference between reported Operating or Net Income and actual cash flows of the company. If a company does not have sufficient cash resources set aside to pay off its Current Liabilities, then this shows a sign of inefficiency or problems with inventory turnover (goods not getting sold). A healthy company is one where inventory is turned over at industry standard rate and one where there's enough cash in the bank to meet both short term and long term debt obligations. Operating Cash Flow therefore checks the quality of a company's reported earnings.

Operating Cash Flow is also known as "Cash Flow Provided by Operations" or "Cash Flow from Operating Activities."

The formula for Operating Cash Flow is:

(Earnings Before Interest & Taxes + Depreciation) - Income Taxes

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