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Cash flow

Operating cash flow

Cash generated by core business operations, before capex or financing activities.

Operating cash flow is the cash a business actually takes in from its everyday operations. It leaves out accounting entries that move no cash (such as spreading out asset costs) and it reflects real changes in things like money owed by customers, inventory, and money owed to suppliers.

Over several years, operating cash flow should stay fairly close to net income. When operating cash flow stays well below reported net income for years on end, that is one of the strongest warning signs in fundamental analysis. It suggests the reported profit is being puffed up by bookkeeping entries that never turn into real cash.

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