Operating cash flow (OCF), cash flow provided by operations or cash flow from operating activities is defined as the amount of cash a company generates from its operations.
Operating Cash Flow is often considered as a better measure of a business's profits as it helps in determining the quality of a company's earnings. Many firms use the accrual method of accounting for their business i.e sales and expense are reported in the period in which they occurred, not when cash is received or paid out. That’s why most analysts prefer operating cash flow figures over earnings/revenue numbers. Also, it is more difficult to manipulate OCF figures. If a firm reports positive Operating Cash Flow number then it indicates sound company, while a negative OCF suggests signs of cash flow problems.
Operating Cash Flow = (Earnings Before Interest & Taxes + Depreciation) - Income Taxes