Operating Cash Flow Ratio
A ratio of a company's operating cash flow to current liabilities. Operating cash flow is a measure of how much cash a company has on hand, while current liabilities show expenses it must pay in the near future. The operating cash flow ratio thus shows a company's ability to meet these liabilities without having to sell assets or take any similar actions.
Operating Cash Flow (OCF) Ratio
What Does Operating Cash Flow (OCF) Ratio Mean?
A measure of how well current liabilities are covered by the cash flow generated from a company's operations. It is calculated as shown here:
Investopedia explains Operating Cash Flow (OCF) Ratio
The operating cash flow ratio helps gauge a company's liquidity in the short term. Using cash flow as opposed to income is sometimes a better indication of liquidity, because cash is how bills are normally paid off.
Related Terms:
• Current Liabilities
• Income Statement
• Liquidity Ratios
• Operating Cash Flow—OCF
• Quick Ratio
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