The wedge
OCF - CapEx = Standard FCF. ASC 230[ASC 230] and IAS 7[IAS 7] both put OCF at the top of the statement and CapEx in investing.
When to cite OCF (not FCF)
- Discussions of operating-cycle efficiency.
- Comparing across CapEx-cycle phases of the same firm.
- Working-capital management diagnostics.
US GAAP vs. IFRS
US GAAP (ASC 230) requires the indirect-method reconciliation. IFRS (IAS 7) allows both direct and indirect; in practice indirect dominates. IFRS also gives more flexibility on classifying interest paid and received (operating or financing); GAAP forces interest paid into operating.
Most common analyst mistake
Saying "cash flow" without specifying which one. In sell-side notes "cash flow" sometimes means OCF, sometimes Standard FCF, sometimes FCFE. Always specify.