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Cash Flow Formula:
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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 generate positive cash flow to maintain and grow operations.
The calculator uses the basic Cash Flow formula:
Where:
Explanation: This formula calculates operating cash flow by adjusting EBIT for non-cash expenses (depreciation) and cash outflows (taxes).
Details: Cash flow analysis is essential 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.
Tips: Enter EBIT, Depreciation, and Taxes in USD. All values must be non-negative. The calculator will sum EBIT and Depreciation, then subtract Taxes to determine Cash Flow.
Q1: What's the difference between cash flow and profit?
A: Profit is an accounting concept based on accruals, while cash flow measures actual cash movements. A company can be profitable but have negative cash flow.
Q2: Why add back depreciation in cash flow calculations?
A: Depreciation is a non-cash expense that reduces taxable income but doesn't involve actual cash outflow, so it's added back to EBIT.
Q3: Is this the only way to calculate cash flow?
A: No, there are other methods like the indirect method (starting from net income) and direct method (tracking all cash receipts and payments).
Q4: What's a good cash flow for a business?
A: Positive cash flow is generally good, but the ideal amount depends on the industry, business stage, and growth plans. Compare to historical figures and industry benchmarks.
Q5: How often should cash flow be calculated?
A: Businesses should monitor cash flow monthly at minimum. Public companies report it quarterly in financial statements.