Operating Cash Flow Ratio Calculator

Operating Cash Flow (Q4): dollars

Operating Cash Flow (Q3): dollars

Operating Cash Flow (Q2): dollars

Operating Cash Flow (Q1): dollars

Current Liabilities: dollars

1. What is the Operating Cash Flow Ratio Calculator?

Definition: This calculator computes the Operating Cash Flow (OCF) Ratio, a liquidity metric that measures how well a company’s cash flow from operations covers its current liabilities over the past twelve months (TTM).

Purpose: Helps investors and analysts assess a company’s short-term financial health and ability to meet obligations without relying on external financing.[](https://www.omnicalculator.com/finance/operating-cash-flow-ratio)

2. How Does the Calculator Work?

The calculator uses the Trailing Twelve Months (TTM) operating cash flow to compute the OCF ratio:

OCF Ratio Formulas:

$ \text{OCF}_{\text{TTM}} = \text{OCF}_{\text{Q4}} + \text{OCF}_{\text{Q3}} + \text{OCF}_{\text{Q2}} + \text{OCF}_{\text{Q1}} $

$ \text{OCF Ratio} = \frac{\text{OCF}_{\text{TTM}}}{\text{CL}} $

Where:

$ \text{OCF}_{\text{TTM}} $: Trailing Twelve Months Operating Cash Flow (dollars)
$ \text{OCF}_{\text{Q4}}, \text{OCF}_{\text{Q3}}, \text{OCF}_{\text{Q2}}, \text{OCF}_{\text{Q1}} $: Operating Cash Flow for the most recent four quarters (dollars)
$ \text{CL} $: Current Liabilities (dollars)

Steps:

Step 1: Collect OCF for the last four quarters. Obtain values from the company’s cash flow statements.
Step 2: Calculate OCF_TTM. Sum the OCF values for Q4, Q3, Q2, and Q1.
Step 3: Compute the OCF Ratio. Divide OCF_TTM by current liabilities from the balance sheet.

3. Importance of Operating Cash Flow Ratio

Calculating the OCF ratio is crucial for:

Liquidity Assessment: Indicates how many times a company can cover its current liabilities with cash from operations.
Financial Health: A ratio greater than 1 suggests good short-term solvency; less than 1 may indicate liquidity issues.
Investment Decisions: Helps compare companies within the same industry for operational efficiency and cash management.

4. Using the Calculator

Example (Walmart, Feb 2019): OCF_Q4 = $7,000,000,000, OCF_Q3 = $6,800,000,000, OCF_Q2 = $7,100,000,000, OCF_Q1 = $6,900,000,000, CL = $77,500,000,000:

Step 1: Collect OCF: Q4 = $7B, Q3 = $6.8B, Q2 = $7.1B, Q1 = $6.9B
Step 2: OCF_TTM: $ 7,000,000,000 + 6,800,000,000 + 7,100,000,000 + 6,900,000,000 = 27,800,000,000 $ dollars
Step 3: OCF Ratio: $ \frac{27,800,000,000}{77,500,000,000} = 0.36 $ times
Result: OCF_TTM = $27,800,000,000.00, OCF Ratio = 0.36 times

This indicates Walmart’s operating cash flow covers 36% of its current liabilities, suggesting moderate liquidity.

[](https://www.investopedia.com/terms/o/ocfratio.asp)

Example 2: OCF_Q4 = $2,500,000, OCF_Q3 = $2,300,000, OCF_Q2 = $2,400,000, OCF_Q1 = $2,200,000, CL = $5,000,000:

Step 1: Collect OCF: Q4 = $2.5M, Q3 = $2.3M, Q2 = $2.4M, Q1 = $2.2M
Step 2: OCF_TTM: $ 2,500,000 + 2,300,000 + 2,400,000 + 2,200,000 = 9,400,000 $ dollars
Step 3: OCF Ratio: $ \frac{9,400,000}{5,000,000} = 1.88 $ times
Result: OCF_TTM = $9,400,000.00, OCF Ratio = 1.88 times

This suggests the company can cover its liabilities 1.88 times, indicating strong liquidity.

Example 3: OCF_Q4 = $1,000,000, OCF_Q3 = $900,000, OCF_Q2 = $950,000, OCF_Q1 = $850,000, CL = $4,000,000:

Step 1: Collect OCF: Q4 = $1M, Q3 = $0.9M, Q2 = $0.95M, Q1 = $0.85M
Step 2: OCF_TTM: $ 1,000,000 + 900,000 + 950,000 + 850,000 = 3,700,000 $ dollars
Step 3: OCF Ratio: $ \frac{3,700,000}{4,000,000} = 0.93 $ times
Result: OCF_TTM = $3,700,000.00, OCF Ratio = 0.93 times

This indicates the company falls short of covering its liabilities, suggesting potential liquidity concerns.

5. Frequently Asked Questions (FAQ)

Q: What is a good OCF ratio?
A: A ratio greater than 1 indicates the company can cover its current liabilities with operating cash flow, suggesting good liquidity. Ratios below 1 may signal financial strain, though context (e.g., industry norms) matters.[](https://corporatefinanceinstitute.com/resources/accounting/operating-cash-flow-ratio/)

Q: Why use TTM for OCF?
A: TTM accounts for a full year’s cash flow, aligning with the balance sheet’s snapshot of current liabilities, providing a more accurate liquidity measure than single-quarter data.[](https://www.omnicalculator.com/finance/operating-cash-flow-ratio)

Q: How does the OCF ratio differ from the current ratio?
A: The OCF ratio uses cash flow from operations, focusing on actual cash generated, while the current ratio uses current assets, which may include non-liquid items.[](https://www.investopedia.com/terms/o/ocfratio.asp)