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CW Asset Finance | Vehicle & Equipment Finance Yorkshire

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What is operating cash flow (OCF)?

Operating cash flow is the cash your business generates from its normal trading activities in a period, before financing and investment. It strips out non-cash accounting entries such as depreciation and adjusts for movements in stock, debtors and creditors, so it shows what day-to-day trading actually contributed to your bank balance.

It is usually derived from operating profit, with depreciation and other non-cash charges added back and changes in working capital applied. If your debtors rise, cash is tied up and operating cash flow falls; if creditors rise, cash is retained and it improves.

Lenders pay close attention to it because it indicates whether trading itself can service borrowing. Strong operating cash flow suggests repayments can be met from ordinary activity rather than from asset sales or further borrowing.

Definitions and presentation vary between accounting standards and between lenders’ own analysis, so the figure quoted to you may not match the one in your accounts exactly. Your accountant can explain how yours is calculated.

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CW Asset Finance is a credit broker, not a lender. Finance is subject to status and lender approval.