CFO (Cash Flow from Operations)
Corporate Credit Analysis glossary · Financial Statement Analysis & Cash Flow Dynamics
Definition
Cash generated by operating activities as reported in the cash flow statement; equals net income plus non-cash charges and working-capital changes.
CFO (Cash Flow from Operations) in plain English
Cash Flow from Operations answers one blunt question: did the company's actual day-to-day business bring in real cash this period? Profit ('net income') on paper can be misleading because it includes things that aren't cash — like 'depreciation,' a bookkeeping charge for wear-and-tear where no money actually left the building. CFO strips that noise out: start with profit, add back those non-cash charges, then adjust for changes in things like unpaid customer bills and unsold inventory. For a credit analyst it's gold, because a company repays loans with cash, not with accounting profit.
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