Cash Flow from Operations

Knowledge Center

Summary, forum, best practices, expert tips and information sources.

23 items • 340.537 visits



What is Cash Flow from Operations? Definition

The Cash Flow from Operations ratio (also: Operating Cash Flow) is used to determine the extent to which cash flow differs from the reported level of either Operating Income or Net Income. (Under both IFRS and US GAAP a company can still easily report healthy income figures, even while its cash resources are poor).

In other words: it is a check on the quality of a company's earnings. It's arguably a better measurement of a business's profits than earnings, because a company can show positive net earnings, and still not be able to pay its debts.

A difference in this ratio and Reported Earnings is indicative of substantial noncash expenses or sales in the reported income figures. If a company reports high earnings but negative Operating Cash Flows, it may be using aggressive accounting techniques. If the Cash Flow from Operations ratio is substantially less than one or decreasing / poor over a longer period of time, cash flow problems are likely.

Cash Flow from Operations calculation

Cash Flow from Operations explained

An Operating Cash Flow calculation can be done in two formats:

  1. Divide operational cash flow by income from operations (this offers a more accurate view of the proportion of cash being spun off from ongoing operations)
  2. Divide cash flow from all transactions (including extraordinary items) by net income (this shows the impact of any transactions that are not related to operations)

Both calculations measure the cash generated from operations, not counting capital spending or working capital requirements.

Special Interest Group

Cash Flow from Operations Special Interest Group.

Special Interest Group
Special Interest Group (97 members)


Forum discussions about Cash Flow from Operations. Below you can ask a question about this topic, share your experiences, report a new development, or explain something.

topic Net Income vs. Income from Operations?
What is the difference between Net Income and Income from Operations?...
Comments1 comments
topic How to create a Cash Flow Statement?
How to prepare a Cash Flow Statement?...
Comments2 comments
🔥 Reconciliation of the Cash Flow from Operations
Why do you think it is necessary to do a reconciliation for the cash flow from operations?...
Comments2 comments
topic Valuation of Start Ups
With a negative EPS & negative cash flow due to either start up business or capital investment, what other way is feasible for valuing a company?...

Start a new topic

Start a new topic about Cash Flow from Operations

Best Practices

The best, top-rated topics about Cash Flow from Operations. Here you will find the most valuable ideas and practical suggestions.

Expert Tips

Advanced insights about Cash Flow from Operations. Here you will find professional advices by experts.


Decapitalization Strategies

Things to do when Liquidity is too High
In Strategy+Business, Issue 46, Spring 2007, BAH VP Justin Petit argues that many companies are sitting on mountains of ...

Net Income vs. Cash Flow

Financial Statement Analysis
Cash Flow from Operations is a much better metric to assess a company’s financial health than Net Income, as cash flows ...

Limitations of Cash Flow From Operations

Financial Statement Analysis
Limitations of Cash Flow From Operations: 1. Cash from operations does not include a charge for use of a firm’s operati...

Accelerating Cash Flow Velocity

Cash Management
To accelerate cash flows, companies should address the following key areas: - Optimize the sales cycle by allowing adju...
Information Sources

Various sources of information regarding Cash Flow from Operations. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.


Cash Flow from Operations Diagram

Analyzing Financial Results
Download and edit this 12manage PowerPoint graphic for limited personal, educational and business use. Republishing in ...

Earnings Management

Real Activities Manipulation
Sugata Roychowdhury finds evidence consistent with managers manipulating real activities to avoid reporting annual losse...

Cash Flow from Operations

CEO Compensation
Emekat T. Nwaeze, Simon Yang and Jennifer Yin examine the role of cash flow from operations (CFO) in CEO cash compensati...

Research Links

Jump to further research sources regarding Cash Flow from Operations.













Compare with Cash Flow from Operations:  Dividend Payout Ratio  |  Debt to Equity Ratio  |  CFROI  |  Cash Value Added  |  Cash Ratio  |  Economic Value Added

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing

More Management Methods, Models and Theory

Special Interest Group

Special Interest Group

Do you know a lot about Cash Flow from Operations? Become our SIG Leader and gain worldwide recognition as an expert.

About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2023 12manage - The Executive Fast Track. V16.3 - Last updated: 2-10-2023. All names ™ of their owners.

12manage is looking for BA/MBA students. More info.