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
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