OCF/NI ratio

The OCF/NI ratio divides operating cash flow by net income and answers a basic question: are reported earnings translating into actual cash? A ratio above 1.0 means the business is generating more cash than it reports as profit (typical for asset-heavy companies where D&A is elevated); a ratio below 1.0 means accounting earnings exceed cash earnings, which is sustainable in moderation but a warning sign in persistence. We treat an OCF/NI ratio below 0.8 as a 'soft pass' yellow card on our quality gate: it does not disqualify the stock outright, but it requires explicit reconciliation in the report, typically through a working-capital walk that explains why the gap is temporary or structural. The ratio is sensitive to working-capital cycle effects — receivables build during high-growth phases naturally suppresses OCF/NI without indicating poor quality — but a multi-year trend of OCF/NI below 0.8 with rising accruals is a stronger signal that triggers our accounting-quality drill-down.