Posted in Finance, Accounting and Economics Terms, Total Reads: 521
Definition: Operating Cash Flow Demand – OCFD
Operating cash flow demand or OCFD is defined as the minimum amount of money required by an organization to fulfill the investment costs needs for its business. This defines the amount of capital needed for business growth & new opportunities.
A strategic investment means any investment in a game plan. OCFD is the amount of cash flow required for each strategic investment to have a 0 NPV or to achieve the minimum profitability. OCFD is helps the companies as well as the investors in evaluating the capital spending decisions.
Example: Suppose, a company's strategic investment is to buy a plant in the new market, then the OCFD will be the minimum amount of cash the plant should generate in its lifetime to meet the returns expected by the investors.