Accounting & Finance
Operating cash flow
Net income plus depreciation and amortisation, adjusted for the movement in receivables and payables.
The Formula
OCF = NI + D - AR + AP
Net income plus depreciation and amortisation, adjusted for the movement in receivables and payables.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| OCF | Operating cash flow | currency | Cash generated by trading. |
| NI | Net income | currency | Profit after all expenses. |
| D | Depreciation and amortisation | currency | Non-cash charges added back. |
| AR | Increase in receivables | currency | Sales not yet collected. |
| AP | Increase in payables | currency | Costs not yet paid. |
What Each Symbol Means
OCFcurrency
Operating cash flow
Cash generated by trading.
NIcurrency
Net income
Profit after all expenses.
Dcurrency
Depreciation and amortisation
Non-cash charges added back.
ARcurrency
Increase in receivables
Sales not yet collected.
APcurrency
Increase in payables
Costs not yet paid.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate cash flow page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Cash Flow, filed under Business. Every number the guide produces comes from substituting into this one line.