Operating cash flow is the amount of cash your business generates through regular operating activities within a specific period of time. If you calculate operating cash flow via the direct method, you’ll find that it directly reflects the inflows and outflows of your bank account. The direct method involves this equation:
Operating Cash Flow=Total Collected Cash from Customers - Cost of Goods Sold - Total Purchases - Operating Expenses.
Here are the five steps you need to take to calculate the direct operating cash flow:
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