Overview

Operating cash flow ratio is a liquidity ratio used to assess a company's ability to meet its short-term obligations with the cash flow resulting from operating activities. It can also be interpreted as the number of times a company is able to pay off its short-term liabilities. The formula for calculating operating cash flow ratio is as follows:

Operating Cash Flow Ratio = Cash Flow from Operations / Current Liabilities

Where:

Cash Flow From Operations = Net Income + Non-Cash Expenses + Changes in Working Capital

Current Liabilities = Short-term obligations due within one year, e.g. short-term debt, accounts payable, and accrued liabilites.

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