well as depreciation, and amortization expenses are stripped out when calculating profitability. Thus, it can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures. It is also a useful metric for understanding a business’s ability to generate cash flow for its owners and for judging a company’s operating performance. The difference between EBITDA and OCF would then reflect how the entity finances its net working capital in the short term. OCF is not a measure of free cash flow and the effect of investment activities would need to be considered to arrive at the free cash flow of the entity. See also Cash flow Cash flow statement Free cash flow References Management accounting Cash flow