This may come as a surprise, but not all companies make money. There are tons of small cap stocks out there that look like the next Microsoft, but chances are they're bankrupt within 5 years. So what the hell happens?!?! Well companies need cash to survive, and if they're not getting it from operating activities they'll have to sell more shares or issue corporate debt to fund operations. Eventually, the business will collapse under the weight of the debt, as operating activities aren't making enough money.
First what is operating cash flow (OCF)? In simple terms, it is the cash flow that comes from operating activities, i.e. the main business, minus the costs of running the business i.e. paying the suppliers. In my opinion, OCF is a more accurate measure of a company's profitable and subsequently its growth. A successful company will have a strong profitable business model that generates money.
For a manufacturer or any company for that matter, the first thing to check should be always be operating cash flows. IF it's negative, do a little more digging, and chances are you'll something fundamentally wrong. For example, customers are leaving. Remember, just looking at the net income won''t be enough, because it is possible to use sneaky accounting techniques to fudge the depreciation, interest expenses, and taxes to alter a company's net profit.
-The Hawk
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