OCF Generation

Follow this video to understand and utilize the OCF Generation widget on the main page of CFO Scoreboard:

The ultimate test of a business is how successfully it generates operating cash flow. The OCF Generation section of CFO Scoreboard analyzes how effectively, efficiently and productively you converted assets, revenue and profits into operating cash flow.

The first thing we look at is how well your business is utilizing your assets to generate operating cash. For example, if you are a manufacturing company, you probably had to invest in some manufacturing equipment and other assets, and these assets are recorded on your balance sheet. We call these "Monetary” or “Balance Sheet” Assets".

CFO Scoreboard shows you how many “dollars” of Operating Cash Flow the business produced for each "dollar" of assets you have on your balance sheet. If that number is higher this time period than the prior time period, we show a thumb’s up.

Some businesses, such as service or technology businesses, don't require a lot of monetary assets on the balance sheet. For these types of companies, their employees are their biggest assets. Frankly, that's true for most companies. So CFO Scoreboard also shows you how much operating cash your employees are generating. We look at it two ways – how much operating cash flow did each employee generate, and for each "dollar" of payroll, how many “dollars” of operating cash did you generate?

Another important metric we look at is how successful you were at turning your revenue into operating cash. A company with low expenses will be better at this than a company with high expenses.

And finally, we look at how successfully you converted your profits into operating cash. A company that has a hard time turning profits into operating cash is probably leaving a lot of that cash on the balance sheet.

Of course, viewing these metrics and relationships in isolation is not that useful. What's important is whether or not your business is improving over time. To see the trends, click the metric you are interested in, and CFO Scoreboard will show you a graph of how that ratio has performed over the past year or so. You want all these ratios getting bigger in each subsequent time period since that would indicate you are improving your ability to convert balance sheet assets, employee “assets” and payroll “dollars” into operating cash flow.

At the top of this section there is a menu that lets you choose how these metrics are displayed. By default, we show you the metrics as ratios, or what we call “MBA Language”, because this is the way that these metrics are commonly taught at university business schools. However, you can also view these ratios in “Plain English”, which might be a bit easier to understand. 

The ultimate test of a business is how successfully it generates operating cash flow. The Cash Conversion Metrics section of CFO Scoreboard analyzes how effectively, efficiently and productively you converted assets, revenue and profits into operating cash flow.

The first thing we look at is how well your business is utilizing your assets to generate operating cash. For example, if you are a manufacturing company, you probably had to invest in some manufacturing equipment and other assets, and these assets are recorded on your balance sheet. We call these "Monetary” or “Balance Sheet” Assets".

CFO Scoreboard shows you how many “dollars” of Operating Cash Flow the business produced for each "dollar" of assets you have on your balance sheet. If that number is higher this time period than the prior time period, we show a thumb’s up.

Some businesses, such as service or technology businesses, don't require a lot of monetary assets on the balance sheet. For these types of companies, their employees are their biggest assets. Frankly, that's true for most companies. So CFO Scoreboard also shows you how much operating cash your employees are generating. We look at it two ways – how much operating cash flow did each employee generate, and for each "dollar" of payroll, how many “dollars” of operating cash did you generate?

Another important metric we look at is how successful you were at turning your revenue into operating cash. A company with low expenses will be better at this than a company with high expenses.

And finally, we look at how successfully you converted your profits into operating cash. A company that has a hard time turning profits into operating cash is probably leaving a lot of that cash on the balance sheet.

Of course, viewing these metrics and relationships in isolation is not that useful. What's important is whether or not your business is improving over time. To see the trends, click the metric you are interested in, and CFO Scoreboard will show you a graph of how that ratio has performed over the past year or so. You want all these ratios getting bigger in each subsequent time period since that would indicate you are improving your ability to convert balance sheet assets, employee “assets” and payroll “dollars” into operating cash flow.

At the top of this section there is a menu that lets you choose how these metrics are displayed. By default, we show you the information in plain English, but you can view the same metrics as ratios if you prefer. These ratios are commonly taught at university business schools, and if you prefer to see the metrics this way, you can change the setting to "MBA Language".