What is "operating cash flow" a measure of?

Operating cash flow is a crucial measure that reflects the cash generated from a company's normal operating activities. This includes cash received from customers for goods and services, minus cash payments to suppliers, employees, and other operating expenses. By focusing on the cash flows directly related to the core business operations, operating cash flow provides insight into the financial health and performance of a company's ongoing business activities.

This metric is essential for assessing a company’s ability to generate sustainable revenue, meet its obligations, and re-invest in its operations without relying on external financing. It highlights how well a company can fund its daily operations through the income it generates, offering a clearer picture of operational efficiency compared to net income, which may include non-cash items.

This understanding is distinct from cash flows from financing activities, which involve transactions with the company's owners and creditors, or cash flows from investing activities, related to the purchase and sale of assets and investments. Neither financing nor investing activities reflect the cash generated from the core operations of the business, which is why they do not represent operating cash flow. Moreover, cash distributed to shareholders in dividends relates to profit distribution rather than the operational cash generated, further confirming that option C is indeed the appropriate measure of operating cash flow.