OCF Top Down Approach Formula

Operating cash flow is an efficiency calculation that measures the cash that a business produces from its principal operations and business activities is used for identifying whether the organization's long-term investments are worth for cash fund. The OCF top down approach formula starts with total sales and subtracts only cash expenses (primarily fixed costs, variable costs, and taxes), leaving out non-cash expenses such as depreciation and amortization.


Operating Cash Flow = Sales - Costs - Taxes

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Capital budgeting plays a vital role in making an investment decision in fixed assets or capital expenditure. It is a major tool in maximizing the company's future profits. Use the OCF top down approach formula to determine cash flow from operations of the company.

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