Operating Cash Flow
Definition
The cash your core business produces in a period, after adjusting net income for non-cash items and changes in working capital like inventory, receivables and payables.
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Formula
Operating Cash Flow = Net Income + Non-Cash Expenses ± Changes in Working CapitalOperating cash flow shows whether the business itself throws off cash or eats it. For growing inventory brands, it is often much lower than profit.
Tracking it monthly makes the cost of growth visible. Watch for: inventory growth outpacing sales growth, which turns profitable months into cash-negative ones.
Example
Net income of $150,000 plus $20,000 depreciation, minus a $90,000 increase in inventory, gives $80,000 of operating cash flow.