What is Operating Cash Flow (OCF)?

Operating Cash Flow (OCF) is a measure of the cash generated by a company's normal business operations. It is a key indicator of a company's ability to generate sufficient cash to maintain and grow its operations. OCF is found on the Cash Flow Statement and starts with net income, then adds back non-cash expenses like depreciation and adjusts for changes in working capital.

For Startups: For a startup, having a positive OCF is a major milestone. It means the core business is self-sustaining from a cash perspective. Investors closely monitor OCF as it represents the true cash-generating power of the business, unlike net income which can be affected by accounting conventions.

For SaaS: SaaS companies often have strong OCF because they collect cash from annual subscriptions upfront, while the revenue is recognized over time. This upfront cash collection is a major advantage of the SaaS business model.