Operating Cash Flow Ratio

The operating cash flow ratio measures a company’s ability to cover its current liabilities with the cash generated from its operating activities. It is calculated by dividing operating cash flow by current liabilities. A higher ratio indicates that a company has sufficient cash flow to meet its short-term financial obligations, which is a sign of good liquidity management.

Example

If a company has $500,000 in operating cash flow and $250,000 in current liabilities, its operating cash flow ratio is 2.0, meaning it has twice the cash flow needed to cover short-term obligations.