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Cash Flow Formula:
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Current Cash Flow represents the net amount of cash and cash-equivalents moving in and out of a business during a specific period. It's a key indicator of financial health, showing a company's ability to generate positive cash flow to maintain and grow operations.
The calculator uses the Cash Flow formula:
Where:
Explanation: The formula starts with EBIT (operating profit), adds back depreciation (a non-cash expense), and subtracts actual taxes paid to arrive at current cash flow.
Details: Cash flow analysis is crucial for assessing a company's liquidity, financial flexibility, and overall financial health. Positive cash flow indicates the company can meet its obligations, reinvest in the business, and provide returns to shareholders.
Tips: Enter EBIT, Depreciation, and Taxes in USD. All values must be positive numbers. The calculator will compute the current cash flow in USD.
Q1: Why add back depreciation in cash flow calculation?
A: Depreciation is a non-cash expense that reduces taxable income but doesn't represent actual cash outflow, so it's added back to EBIT.
Q2: How does this differ from free cash flow?
A: Free cash flow also accounts for capital expenditures and changes in working capital, while this calculation focuses on current operating cash flow.
Q3: What's a good cash flow value?
A: Positive cash flow is generally good, but the ideal amount varies by industry and company size. Compare to historical values and industry benchmarks.
Q4: Can cash flow be negative?
A: Yes, negative cash flow means more cash is going out than coming in, which may indicate problems if sustained over time.
Q5: How often should cash flow be calculated?
A: Businesses should monitor cash flow monthly, with more detailed analysis quarterly and annually.