Operating Cash Flow

Operating Cash Flow (OCF) is basically an accounting concept. This is the amount of cash obtained and generated from the whole operation of the company. It is the revenue minus the operating expenses. It is usually listed as the first item in a cash flow section in the company’s accounts.

In its most simple form, the operating cash flow is a record of the company’s money that comes in and out during the whole operation. The amount of money received as paid in includes the revenues and money loaned by the customers with which are not received at the late part of the accounting year. While the amount of money considered to be a paid out is the money that is included in the direct costs of the manufactured products like the labor costs and the cost for raw materials and any amount of money that is indebted to suppliers that are not received at the later part of the year. However the costs of these didn’t involve the expenses in marketing and capital expenditure.

In the US, operating cash flow usually involves depreciation. This describes the measure of the assets of the company and how these have assets lost its value. In terms of manufacturing, one concrete example is the machineries in an old state. Some of the amount of money that was used to buy the machineries may not be recovered upon selling the item on. Depreciation is not taking into account if the firm is whether or not going to be selling the assets. Depreciation is solely an accounting method that focuses on the cost of the assets life.

Taking a closer look of both the actual profit and the operating cash flow in the numerous sets of the company’s account would be the best upon revealing. The overall view of the two variables and the detailed points of how both of them differ may reveal fundamental problems in the company’s operation and structure. For instance, a company acquires profit but at the same time be crippled with the cost of capital expenditure in terms of spending much in the marketing and the replacing of machinery. These are only some of its possible effects in the business.

It is almost disputable that operating cash flow may be one of those that are illuminating in figures written at the company accounts. This is true because it is hard to manipulate rather than forcing back sales or purchases at one time of the financial year so it will be carried away recorded on the following year, the practical way to ultimately change the said figures is to lie. At the same time it is also gives a concrete picture of the business if it is profitable fundamentally. However, a rigid examination in full of all accounts is very important and as needed in order to identify of how long can a loss-making company can survive from the possible losses or if the company is obtaining profit so fast enough to meet the long term debts.