Cash Flow from Operations
CFO, Operating Cash Flow
FundamentalsThe cash a company actually received from its core business of selling goods and services during the year, after paying its operating costs. It excludes investing and financing flows.
Formula
CFO to PAT = Sum of 5 years' Cash Flow from Operations / Sum of 5 years' Net Profit
Why it matters
Accounting books profit at the moment of sale, not payment. Comparing five years of operating cash flow with five years of net profit is the simplest anti-fraud check: the ratio should be above 1, or at least above 0.8.
Indian example
Related terms
Learn the concept
Reading an Income Statement →From the research
How The Valuation Node Approaches Research
The research method behind The Valuation Node, how assumptions are stated, how sources are chosen, and how uncertainty is disclosed in every published analysis.
ValuationWhat Three Years of a Cash Flow Statement Reveals That One Year Hides
A single year of cash flow is a snapshot. Three years is a story. Learn what the trend reveals about earnings quality, funding, and sustainability.
ValuationComparing Two Companies on ROE, and Why the Higher One Is Not Always Better
Two companies can report the same ROE for very different reasons. DuPont analysis shows why an ROE built on leverage is not the same as one built on quality.