Obtaining A Delaware Certificate Of Good Standing
Learn how out-of-country businesses can obtain foreign qualification in New York, including legal steps, compliance, and registration requirements.
Understanding and identifying operating cash flow ratio is a crucial part of financial monitoring to ensure businesses are performing well.
Operating cash flow (OCF) ratio is a metric to help understand how liabilities are impacting a business and whether it’s in the best position to grow.
This article will look at what operating cash flow ratio is, the formula to calculate operating cash flow ratio, and examples to help you better understand the role of this metric.
Let’s first dive into what operating cash flow ratio is.
Essentially, cash flow ratio is a metric that focuses on liquidity and understanding the financial performance of a business.
Operating cash flow ratio is a measure of whether companies can pay off liabilities with the cash flow generated from business operations.
It’s easy to get it confused with operating cash flow, but there is a difference.
You can analyze operating cash flow and operating cash flow ratio using the Wise cash flow statement to better understand how your business is performing.
Get your free Wise cash flow statement
Now that a definition has been established, it’s time to look at how to calculate operating cash flow ratio.
The formula is:
Operating Cash Flow Ratio = Operating cash flow / Current Liabilities¹ ² |
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Let’s take each component individually to understand what number needs to be plugged in.
While operating expenses and current liabilities will differ based on the sector and industry, it’s important to understand each category to make calculating operating cash flow ratio easier.
Examples of operating cash flow can include:
Current liabilities refer to short-term financial payments businesses are obligated to make, typically within one year of a business operating cycle.
Examples can include:
Wise Business can help you save big time on international payments.
Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in currencies.
Signing up to Wise Business allows access to BatchTransfer which you can use to pay up to 1000 invoices in one go. This is perfect for small businesses that are managing a global team, saving a ton of time and hassle when making payments.
Some key features of Wise Business include:
Mid-market rate: Get the mid-market exchange rate with no hidden fees on international transfers
Global Account: Send money to countries and hold balances in multiple currencies, all in one place. You can also get major currency account details for a one-off fee to receive overseas payments like a local
Access to BatchTransfer: Pay up to 1000 invoices in one click. Save time, money, and stress when you make 1000 payments in one click with BatchTransfer payments. Access to BatchTransfer is free with a Wise Business account
Auto-conversions: Don't like the current currency exchange rate? Set your desired rate, and Wise sends the transfer the moment the rate is met
Free invoicing tool: Generate and send professional invoices
No minimum balance requirements or monthly fees: US-based businesses can open an account for free. Learn more about fees here
All sources checked 30 September 2021
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This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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