Editing Operating cash flow (section)

==Operating Cash Flow vs. Net Income, EBIT, and EBITDA==
Interest is a financing flow. <ref>[[Ross, Fundamentals of Corporate Finance, 12th edition, 2019]]</ref>  It takes into consideration how the operations are financed or taxed. Since it adjusts for liabilities, receivables, and depreciation, operating cash flow is a more accurate measure of how much cash a company has generated (or used) than traditional measures of profitability such as [[net income]] or [[Earnings before interest and taxes|EBIT]]. For example, a company with numerous fixed assets on its books (e.g. factories, machinery, etc.) would likely have decreased [[net income]] due to [[depreciation]]; however, as depreciation is a non-cash expense<ref>[https://www.wikinvest.com/depreciation Definition of depreciation via Wikinvest]{{dead link|date=May 2024|bot=medic}}{{cbignore|bot=medic}}</ref> the operating cash flow would provide a more accurate picture of the company's current cash holdings than the artificially low net income.<ref>[https://www.wikinvest.com/Operating_Cash_Flow Definition of OCF via Wikinvest]{{dead link|date=May 2024|bot=medic}}{{cbignore|bot=medic}}</ref>

[[Earnings before interest, taxes, depreciation and amortization]] or just [[Earnings before interest, taxes, depreciation and amortization|EBITDA]] is a kind of operating income which excludes all non-operating and non-cash expenses. With it, factors like [[debt]] financing as well as depreciation, and amortization expenses are stripped out when calculating profitability.<ref name=":0" /> Thus, it can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures (which may also be deemed a demerit of the EBITDA measure). It is also a useful metric for understanding a business’s ability to generate cash flow for its owners and for judging a company’s operating performance. The difference between [[Earnings before interest, taxes, depreciation and amortization|EBITDA]] and OCF would then reflect how the entity finances its net working capital in the short term. OCF is not a measure of free cash flow and the effect of investment activities would need to be considered to arrive at the free cash flow of the entity.