Operating cash flow is used to determine the amount of cash generated by a company at a given time.
If you manage to have a
cuba email list business with a good operating cash flow, you will be able to make your business scalable and achieve sustainable growth.
Operating cash flow is essential to the operation of any business. However, many companies do not pay enough attention to it. As a result, they may find themselves with sales and profits, but no liquidity .
If daily operations do not generate sufficient liquidity to meet supplier payments, payroll, loans or taxes, companies will need external financing or capital increases . Even so, this may only be a stopgap. If cash flow does not improve, the only thing they will achieve is to delay their closure.
On the other hand, if you manage to have a business with a good operating cash flow, you will be able to make your business scalable and achieve sustainable growth .
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What is operating cash flow?
Operating cash flow (OCF) is also known as operating cash flow in English terminology. Its calculation allows us to determine the amount of cash generated by the company with its normal commercial operations in a given period of time.
This is an important indicator of a company's financial health. It allows us to determine the cash inflows and outflows generated by the company's normal operations , determining whether this balance is positive or negative.
It is important to note that it does not measure the profits or losses of a company, but rather the balance resulting from the treasury of its main activity, regardless of the result that these operations generate in its profit and loss account.
The calculation of operating cash flow does not include the interest that the company has to pay to finance its operations. However, the depreciation of assets through amortization is included.
Thanks to operating cash flow , the company will have valuable information about its payment capacity in order to meet its debts.
The following are considered cash outflows from operating cash flow :
Payments for the purchase of materials for manufacturing. Less outstanding payments.
Payments to merchandise suppliers and creditors for services rendered. Less accounts payable.
Refunds made for structural expenses.
Payments to employees.
Payment of fees and taxes related to the exercise of the company's activity and ordinary operations.
How to calculate operating cash flow?
The following formula is used to calculate operating cash flow:
Cash flow = EBIT (Earnings before interest and taxes) + amortization + provisions + accounts payable – accounts receivable
The result of this formula can be:
Positive: means that the funds received in the period were greater than the funds withdrawn. Therefore, the company will have generated cash in the period analyzed.
Negative: means that cash outflows were greater than cash inflows. In this case, the company will have less cash in the period considered.
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