What is operating cash flow?

Operating cash flow refers specifically to the cash generated from the normal operations of a business. It represents the money a company earns from its core business activities, excluding any income derived from non-operating activities such as investments or financing. This measure is essential for assessing the operational efficiency of a company, as it shows how well the business can generate cash to sustain its day-to-day operations, pay expenses, and support ongoing activities.

The designation of operating cash flow is crucial because it provides insights into the fundamental profitability of a business without the distorting effects of various financing and investment activities that may not directly relate to the core operations. It is a key figure on the cash flow statement, which helps stakeholders understand the business's ability to create value from its primary activities.

In discussing other options, investment activities typically involve cash flows related to the acquisition or sale of long-term assets, while financing activities relate to cash generated from borrowing or repaying debts and issuing or repurchasing shares. Adjusting cash flow for tax payments is not the primary focus of operating cash flow, as it encompasses the broader scope of cash generated from routine business operations.