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What are Operating cash flow in accounting?
Operating cash flow is the money generated by a firm to perform its regular operations in a specific period of time. It tells about the operational health of the firm. If a firm generates positive cash flow, it means that the firm can’t remain solvent in long run. If the firm generates negative cash flows, it should have some financial support to meet the needs or to raise its additional capital.
Operating cash flow = operating income + depreciation – taxes (+/-) change on working capital
Operating income = revenue – cost of sales
Purpose of operating cash flow is explained below −
- To meet its operating expenses.
- Provide capital for future.
- Meet entity’s interest and debt requirements to pay dividends.
The examples are given below −
- What are Investing activities in cash flow in accounting?
- What are cash flow from Financial activities in accounting?
- Write the accounting entries for cash flow hedge
- Differentiate between cash flow and free cash flow.
- What is Free Cash Flow?
- What is Accounting Rate of Return in discounted cash flow technique in capital budgeting?
- What are the Sources and Uses of Cash Flow?
- Differentiate cash accounting and accrual accounting.
- What is a cash flow hedge?
- What is Capital Cash Flow method?
- What is free cash flow formula?
- Explain cash based accounting.
- What is Free Cash Flow in Corporate Finance?
- What is difference between cash flow statement and fund flow statement?
- What is free cash flow to equity (FCFE)?