Operating Income Greater than OCF

CFA General
#1

Can someone give me a few a examples how Operating Income can be negative but Operating Cash Flow positive?

Thx

#2

Lots of depreciation, amortization, depletion, and accretion expenses.

Huge decrease in Accounts Receivable, Inventory, Prepaid Expenses.

Huge increase in Accounts Payable, Wages Payable, Taxes Payable, Interest Payable, Unearned Revenue.

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#3

Spot-on, S2000magician. Great response!

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#4

Thanks!

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#5

Thanks. Let’s try to apply this to a practical example.

Take gamestop… here are the last 3 years of operating income: (237.80) (399.60) (702.00)

here are the last 3 years of operating cash flow:
123.70 (414.50) 325.10

Would you say the biggest factor in this case is reduction in inventory?

#6

I have no idea, because I haven’t looked at their financial statements.

Have a look at them, go through the list I gave you, and let us know what you find. If they’re using the indirect method for computing CFO (which is a 95% lock), you’ll see it pretty quickly on the cash flow statement.