Operating Cash Flow Margin Ratio

Alternative names of Operating Cash Flow Margin:


  • Operating Cash Flow Margin
  • Operating Cash Flow / Sales Ratio
  • Cash Return on Sales
  • Operating Cash Flow.

What Does Operating Cash Flow Margin Mean?

Operating cash flow margin determines the ability of an enterprise to generate cash from sales. In essence, it estimates the percentage of operating cash flow in the proceeds. The indicator is used quite often for the profitability estimation to define the efficiency of obtaining cash for the sales of a single unit. It is also used to assess the company’s financial position and determine the potential for its growth.

Formula of the Operating Cash Flow Margin

CFO / R = Cash flow from operating activities / Revenues from sales * 100%.

Normative Value of Operating Cash Flow Margin

The higher the operating cash flow margin, the better for the enterprise. A high value of the indicator is especially desirable. However, there is no specific standard that should be applied for the analysis, since the value of the indicator depends on various types of activity.

It’s worth noting that if the volume of proceeds increases but the cash flow from operating activity does not change, it indicates the enterprise experiences some negative tendencies. Such trends may cause losses in a relatively stable situation. Ideally, the cash flow from operating activity should grow at a higher pace than the amount of proceeds from sales. Normally, the cash flow from operating activity should be proportional to the proceeds.