What is Operating Cash Flow?
Operating cash flow is the cash a company generates from its normal business operations during a period. It strips out financing and investing flows to show core cash-generating capacity.
How It Works
- Start with net income.
- Adjust for non-cash items (depreciation, provisions).
- Adjust for changes in working capital to reach operating cash flow.
Saudi Context
Saudi banks and CMA analysts treat operating cash flow as the cleanest measure of business quality, especially for sectors where accrual earnings differ significantly from cash (construction, real estate).
Example
A Saudi retailer with SAR 50 million net income, SAR 10 million depreciation, and a SAR 5 million working capital increase reports SAR 55 million in operating cash flow.