Definition
Operating cash margin measures operating cash flow as a share of revenue to show how efficiently revenue turns into cash.
Formula
Operating cash margin = operating cash flow / revenue
Example
Operating cash flow $400k on $2M revenue equals 20%.
How to use it
- Use trailing periods to smooth volatility from collections timing.
- Compare to operating margin to see how much accruals shift cash timing.
- Monitor working capital drivers (DSO, DPO, inventory) to explain changes.
- Use cash margin for runway planning, not just profitability reporting.
Common mistakes
- Using net income instead of operating cash flow.
- Comparing margins across periods with different revenue recognition timing.
- Ignoring one-time cash inflows that temporarily inflate margin.
Why this matters
This term matters because cash timing and risk are usually the difference between a plan that works on paper and a plan that survives. Use consistent definitions so decisions are comparable over time.
Practical checklist
- Write a 1-line definition for "Operating Cash Margin" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Sanity-check with a related calculator from the same category on MetricKit.
- Read the related guide (e.g., Runway and burn: gross vs net burn, working capital, and cash levers) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- DCF Sensitivity Calculator: Estimate how enterprise value changes with discount rate and terminal growth assumptions (simple 3x3 sensitivity).
- Loan Payment Calculator: Compute monthly payment, total interest, and total paid for a loan using amortization.
- APR to APY Calculator: Convert APR to APY (and APY to APR) given compounding frequency.
- Real Return (Inflation-adjusted) Calculator: Convert nominal return into real return given an inflation rate (and compare the difference).
- Deferred Revenue Rollforward Calculator: Bridge billings to recognized revenue by rolling deferred revenue forward for a period.
Guides
- Runway and burn: gross vs net burn, working capital, and cash levers: A practical guide to runway: compute net burn, understand why cash differs from profit, and how working capital and collections change runway.