Operating Cash Flow

The cash generated or consumed by a business's core operating activities in a period, excluding investing and financing activities, representing the cash profit of the fundamental business.

Operating cash flow is the purest measure of whether a business model is fundamentally working. A company can be profitable on paper while consuming cash through working capital needs; positive operating cash flow signals genuine financial health.

A founder's business shows £40,000 net profit for the quarter, but operating cash flow is only £18,000 because she is carrying £22,000 more in unpaid receivables than last quarter. The gap signals a collections problem that is masking healthy profitability with a cash crunch.