Enter the operating income, depreciation expense, taxes, and the change in working capital to determine the operating cash flow (OCF).

## Operating Cash Flow Formula

The following formula is used to calculate the operating cash flow of a business.

OFC= OI + D – T + CWC

• Where OFC is the oeprating cash flow (\$)
• OI is the operating income (\$)
• D is the depreciation (\$)
• T is the taxes (\$)
• CWC is the change in working capital (\$)

## OCF Definition

OFC, short for operating cash flow, is a term used in business and finance to describe the amount of cash that is generated by a business’s typical operating.

This means the cash flow does not include any cash flows from investments etc unless the core of the business is actually investing.

## OCF Example Problem

How to calculate operating cash flow (OCF)?

First, determine the total operating income earned through the business’s normal operations. For this example, the business earns a yearly amount of \$500,000.00.

Next, determine the depreciation on assets owned by the company. In this case, the business has few depreciation assets, and it only amounts to \$40,000.00.

Next, determine the taxes that need to be paid on the income. To simplify this example will use a flat rate of \$100,000.00 as an example.

Next, determine the change in net working capital. After the year period, the change in working capital is found to be \$30,000.00.

Finally, calculate the operating cash flow using the formula above:

OFC= OI + D – T + CWC

OFC= \$500,000 + \$40,000 – \$100,000 + \$30,000

OFC= \$470,000.00.