What is Operating Cash Flow Ratio?
The operating cash flow ratio is a liquidity ratio that divides cash flow from operations by current liabilities. It shows how many times a company can pay off its short-term obligations from cash generated by core operations during the period.
How It Works
- Take cash flow from operations from the cash flow statement.
- Take total current liabilities from the balance sheet.
- Divide CFO by current liabilities.
- A ratio above 1 indicates short-term obligations are fully covered by operating cash.
Saudi Context
Saudi banks reviewing SME credit applications often request this ratio alongside the current ratio to distinguish profitable but cash-constrained businesses.
Example
If CFO is SAR 60 million and current liabilities are SAR 80 million, the operating cash flow ratio is 0.75, meaning operations cover 75 percent of short-term obligations.