Operating cash flow shows whether the core business generates cash. If net income is consistently much higher than OCF, profits may depend on accruals.
How to use the Operating Cash Flow Calculator
- Net income
- Depreciation and amortization
- Other non-cash items (stock compensation etc.)
- Increase in accounts receivable
- Increase in inventory
- Increase in accounts payable
- Revenue
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter net income, non-cash expenses and the changes in receivables, inventory and payables.
Tips
- Use consistent periods (a year or a quarter) for flow figures and period-end values for balances.
- Average opening and closing balances when a ratio mixes a flow with a stock.
- Benchmark against competitors in the same industry.
- Read the ratio together with others – profitability, liquidity and efficiency tell different stories.
Common mistakes to avoid
- Using sales instead of cost of goods sold for inventory ratios.
- Mixing gross, operating and net profit.
- Ignoring one-off items that distort a single year.
Inputs explained
| Field | What to enter |
|---|---|
| Net income | Amount in your currency |
| Depreciation and amortization | Amount in your currency |
| Other non-cash items (stock compensation etc.) | Amount in your currency |
| Increase in accounts receivable | Amount in your currency |
| Increase in inventory | Amount in your currency |
| Increase in accounts payable | Amount in your currency |
| Revenue | Amount in your currency |
What each result means
- Operating cash flow = [Net income] + [Depreciation and amortization] + [Other non-cash items (stock compensation etc.)] – [Increase in accounts receivable] – [Increase in inventory] + [Increase in accounts payable]
- Operating cash flow margin = [Operating cash flow]÷[Revenue]×100
- Cash conversion (OCF ÷ net income) = [Operating cash flow]÷[Net income]
Example values
How the main result changes when Net income changes and everything else stays at the example values above:
| Net income | Operating cash flow |
|---|---|
| 150,000 | 240,000 |
| 225,000 | 315,000 |
| 300,000 | 390,000 |
| 375,000 | 465,000 |
| 450,000 | 540,000 |
| 600,000 | 690,000 |
Formula
OCF = net income + depreciation and amortization + other non-cash items − increase in receivables − increase in inventory + increase in payablesWorked example
Inputs — Net income: $300,000; Depreciation and amortization: $120,000; Other non-cash items (stock compensation etc.): $20,000; Increase in accounts receivable: $40,000; Increase in inventory: $25,000; Increase in accounts payable: $15,000; Revenue: $2,000,000.
Results — Operating cash flow = $390,000.00; Operating cash flow margin = 19.5 %; Cash conversion (OCF ÷ net income) = 1.3.
Frequently asked questions
What is operating cash flow?
Cash generated by a company's normal business operations.
Why is depreciation added back?
It's an expense that doesn't use cash.
Is higher OCF than net income good?
Generally yes – earnings are backed by cash.
What formula does the Operating Cash Flow Calculator use?
OCF = net income + depreciation and amortization + other non-cash items − increase in receivables − increase in inventory + increase in payables.