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Free cash flow to operating cash flow ratio

Free Cash Flow / Operating Cash Flow Ratio

Description

Free cash flow (FCF) to operating cash flow (OCF) ratio compares two kinds of cash flows (free and operating). Free cash flow is calculated by deducting capital expenditure from OCF. Data needed to calculate this ratio is collected from cash flow statement.

Norms and limitations

Higher value of free cash flow to operating cash flow indicates a better financial strength.

It is recommended to compare this ratio to those of the companies, working within the same industry.

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