Operating Cash Flow Calculator

Profitable but broke, quantified.

Profitable but broke, quantified. Cash below profit means growth absorbed it into stock and receivables.

Written and maintained by Mohit PatelLast checked August 4, 2026How we build these

Currency

Net profit

Depreciation & amortisation

Increase in inventory

Increase in receivables

Increase in payables

Operating cash flow

$57,000

against $84,000 of profit

Net profit$84,000

Add back depreciation$12,000

Working capital absorbed−$39,000

Gap between profit and cash−$27,000

Cash is $27,000 below profit because growth absorbed it into stock and receivables. That gap is what "profitable but broke" means, and it widens as growth accelerates.

How the Operating Cash Flow Calculator works

Cash below profit means growth absorbed it into stock and receivables. That gap is what 'profitable but broke' means, and it widens as growth accelerates, which is why fast-growing businesses run out of money.

Also known as: OCF calculator · cash from operations · operating cash generated

Building it from profit

Operating cash flow starts with net profit and adjusts for everything that affected profit without moving cash, and everything that moved cash without affecting profit.

Add back the non-cash charges: depreciation and amortisation, which reduced profit and moved nothing. Then adjust for working capital movements: an increase in inventory or receivables consumed cash, an increase in payables provided it.

The result answers the question that matters more than profit: did the trading operation generate cash this period, or consume it. A business can be profitable and cash-negative for years, and this is the statement that shows it.

The working capital adjustment, which does the damage

For a stock business the working capital movement is usually the largest adjustment and it is nearly always negative during growth.

Take a business with £8,000 of monthly profit whose inventory grew by £12,000 because sales are rising. Operating cash flow is minus £4,000 despite a profitable month, and the bank balance falls. Nothing has gone wrong; growth was funded from cash.

This is the mechanism behind almost every profitable failure in retail. The profit statement records success and the cash statement records the cost of it, and businesses that only look at the first are surprised by the second at exactly the point where the growth is going well.

Reading the quality of earnings

Operating cash flow divided by net profit is a quality measure. Consistently above 1 means profits convert reliably to cash. Persistently below 1 means profit is being absorbed by working capital or is not real.

A ratio below 1 during a growth phase is expected and healthy. The same ratio during flat trading is a warning: profits are being reported and cash is not arriving, which usually means inventory is building or receivables are ageing.

Lenders and acquirers look at this ratio closely and often before they look at profit, because it is much harder to manipulate. A business presenting strong profits and weak cash conversion attracts questions immediately, and the answers are usually about stock.

Free cash flow, which is what is left

Free cash flow is operating cash flow minus capital expenditure. It is the cash actually available to repay debt, distribute, or reinvest in growth.

For most ecommerce businesses capital expenditure is small: equipment, fit-out, occasionally software development capitalised. Which means free cash flow tracks operating cash flow closely, and the working capital movement remains the dominant variable.

The distinction matters more for anyone considering a warehouse, automation or a significant systems build. A year with £60,000 of operating cash flow and £50,000 of racking and equipment has £10,000 of free cash flow, which is the number that determines what else is possible that year.

Forecasting it forward

The forward version is a thirteen-week cash flow forecast, and it is the single most useful financial document a small business can maintain. Weekly opening balance, receipts, payments, closing balance, for a quarter ahead.

Thirteen weeks is the convention because it is long enough to see problems with time to act and short enough that the estimates are meaningful. Twelve-month forecasts are for planning; thirteen-week forecasts are for survival.

Update it weekly against actuals. The variance between forecast and actual is itself informative, and after a couple of months most businesses find their forecast is systematically wrong in one direction, usually optimistic on receipts. Correcting for that bias turns the forecast from a wish into a tool.

Where to go next

The Operating Cash Flow question rarely arrives on its own. These are the ones that usually come with it:

Cash Conversion Cycle Calculator — Days between paying and being paid.
Working Capital Calculator — The quick ratio is the honest one.
Burn Rate Calculator — Gross burn and net burn are different.
Etsy Fee Calculator — Every Etsy fee on one sale, itemised.

Not financial advice. Marketplace fees change, and they vary by country, plan and seller status. Every rate here is an editable default, not a quoted price, check the platform's current fee schedule before you price a product against it. This is not tax or business advice.

Frequently asked questions

Why is cash flow different from profit?

Profit is recognised when a sale is made; cash moves when money changes hands. Buying stock reduces cash and not profit; selling on credit raises profit and not cash.

How do I calculate operating cash flow?

Net profit, plus non-cash charges such as depreciation, less the increase in working capital. The last term is what growth absorbs.

Why does growth consume cash?

Because stock and receivables grow with the business and both have to be funded before the corresponding revenue arrives. Faster growth means a larger gap.

Can cash exceed profit?

Yes, when stock is being run down or suppliers are funding more of the business. Both are finite, so a persistent excess is worth understanding rather than celebrating.