Cash flow from operations

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Definition: Cash flow from operations

Also called as Operating Cash Flows (OCF), it is the cash generated by the company’s regular operations or business activities. It is calculated by subtracting the operating expenses from the operating revenues. Another way of representing it is:

OCF = EBIT + Depreciation – Taxes

It is a good indication of the company’s progress. A new growing firm usually has negative OCF due to huge operating expenses in the initial years whereas a developed firm should ideally have a large positive OCF and should be generating a continuous revenue stream from its daily operations.

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