1. What is Cash Flow?

Cash Flow represents the net amount of cash and cash-equivalents moving into and out of a business. It's a key indicator of financial health, showing a company's ability to pay expenses, reinvest, and return money to shareholders.

2. How Does the Calculator Work?

The calculator uses the Cash Flow formula:

Where:

• \( EBIT \) — Earnings Before Interest and Taxes (USD)
• \( Depreciation \) — Depreciation expense (USD)
• \( Taxes \) — Taxes paid (USD)

Explanation: This formula calculates operating cash flow by starting with EBIT, adding back non-cash expenses (depreciation), and subtracting cash outflows for taxes.

3. Importance of Cash Flow Calculation

Details: Cash flow analysis is crucial for assessing a company's liquidity, financial flexibility, and overall financial performance. It helps investors and managers understand whether a company can meet its obligations and fund operations.

4. Using the Calculator

Tips: Enter EBIT (Earnings Before Interest and Taxes), Depreciation expense, and Taxes paid in USD. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between cash flow and profit?
A: Profit is an accounting concept that includes non-cash items, while cash flow tracks actual money movement. A company can be profitable but have negative cash flow.

Q2: Why add back depreciation?
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.

Q3: What are typical cash flow values?
A: Positive cash flow is generally good, but ideal values vary by industry. Compare to historical values and industry benchmarks.

Q4: Are there limitations to this calculation?
A: This is a simplified version. Full cash flow statements also consider changes in working capital and capital expenditures.

Q5: Should this be used for investment decisions?
A: While useful, investors should consider full financial statements and other metrics before making investment decisions.