FCF vs OCF: Free Cash Flow vs. Operating Cash Flow Explained
Free cash flow vs. operating cash flow explained — what each measures, why FCF matters for valuation, and how to value the real cash a business generates.
Operating cash flow (OCF)
Free cash flow (FCF)
Free cash flow yield
Projecting value from cash flow
Cash flow as a quality check
OCF vs. FCF: common questions
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Frequently asked questions
What is the difference between FCF and OCF?
Operating cash flow (OCF) is the cash a business generates from its core operations. Free cash flow (FCF) is OCF minus capital expenditures — the cash left over after maintaining and growing the asset base. FCF is what could actually be returned to shareholders.
Which is better for valuation, FCF or OCF?
FCF is usually the better valuation input because it reflects cash after the investments needed to keep the business running. OCF is useful for capital-light businesses or when capex is lumpy and distorts a single year of FCF.
Can a company have positive operating cash flow but negative free cash flow?
Yes — it happens whenever capital spending exceeds operating cash flow, common for companies building factories, networks or fleets. It is not automatically bad, but persistent negative FCF means the business consumes rather than produces cash.