Operating Cash Flow Calculator

Operating cash flow is a critical measure for assessing a company’s underlying financial performance. This calculator helps you determine the cash flow generated from operating activities. Accurately measuring operating cash flow is an important way to assess a company’s liquidity, financial health and operational effectiveness.

When using the online operating cash flow calculator: you can calculate capital budgeting by entering sales, costs, tax rate and depreciation information.

How to Calculate Operating Cash Flow?

Operating cash flow is a critical financial measure that shows the cash inflows and outflows from a company’s operating activities. You can follow the steps below to calculate operating cash flow:

Steps to Calculate Operating Cash Flow:

1. Determine Net Profit:

Find the net profit from the company’s income statement (profit and loss statement). Net profit represents the company’s profit from operating activities.

2. Depreciation and Profit/Loss on Subsidiaries:

Subtract depreciation expenses from net profit and add the profit or loss from associates.

Depreciation is an expense that represents the wear and tear of assets over time. Profit or loss from associates reflects the income or loss from the company’s investments in other businesses.

3. Identifying Net Changes:

Calculate the net changes in current assets and current liabilities. This shows changes in operating cash flow.

Current assets usually include inventories, receivables and other liquidity. Short-term liabilities usually include supplier payables and other short-term debt.

4. Calculating Operating Cash Flow:

Calculate operating cash flow using the following formula:

Example:

• Net Profit USD 500,000
• Depreciation: USD 50,000
• Profit from Subsidiary USD 10,000
• Change in Short Term Assets: +20,000 USD (increase)
• Change in Short Term Debt: USD -5,000 (decrease)

Operating Cash Flow = 500.000 + (50.000 + 10.000) – (20.000 – 5.000) = 545.000 USD

In this example, the operating cash flow is calculated as 545,000 USD. A positive operating cash flow indicates that the company has a net cash inflow from operating activities.

What is Operating Cash Flow?

Operating cash flow is a critical financial measure of a company’s cash inflows and outflows from operating activities. Operating cash flow is used to assess a company’s liquidity, financial health and operational efficiency. It is an important tool in assessing a company’s cash position, its ability to meet short-term payments and its financial strategies.

Operating cash flow includes the following key elements:

Cash inflows from operating activities:

• Cash inflows from sales.
• Receivables collections.
• Cash receipts from other operating activities.

Cash Outflows from Operating Activities:

• Payments to suppliers.
• Salaries and other payments to employees.
• Cash outflows from other operating activities.

Depreciation and Profit/Loss from Associates:

• Net profit after deducting depreciation expenses.
• Addition of profit or loss from associates.

Net Changes:

• Net changes in current assets and current liabilities.

A positive operating cash flow indicates that the company’s cash generated from operating activities is sufficient to cover outflows. A negative operating cash flow may indicate that the company may have liquidity problems and may be in financial distress.

Operating cash flow is an important tool for assessing the financial performance of the business, improving its strategies and supporting financial management decisions. This measure provides information about the overall health of the company, which is also taken into account by investors, lenders and other financial stakeholders.

Uses of the Operating Cash Flow Calculator

The operating cash flow calculator can be used in a company’s cash management, financial performance analysis and strategic planning processes. The main uses of the operating cash flow calculator can be as follows:

Liquidity Management: The operating cash flow calculator is used to assess a company’s liquidity position. A positive operating cash flow indicates the company’s ability to meet its short-term payments.

Financial Health Assessment: Companies assess their financial health by regularly monitoring operating cash flow. A positive operating cash flow indicates that the company is financially strong.

Credit Assessments: Financial institutions consider operating cash flow to assess a company’s credit worthiness. Credit assessments can help determine the company’s borrowing capacity.

Strategic Planning: Operating cash flow plays an important role in a company’s strategic planning processes. By forecasting future cash flows, companies can make strategic decisions.

Investor Relations: The company’s investors evaluate the financial performance of the company by following the operating cash flow. An operating cash flow that reassures investors can increase the value of the company.

Financial Analysis: Financial analysts analyze the company’s financial performance in detail using operating cash flow calculations. These analyses help to examine the income-expense balance of the business.

Decision Making Processes: Managers can make strategic decisions using operating cash flow data. For example, they can perform cash flow analyses to plan the financing of investment projects or optimize business operations.

The operating cash flow calculator is an important tool to assess the financial health of the company and determine its financial strategies. These calculations play a critical role for companies to achieve sustainable growth, be prepared for crisis situations and achieve their financial goals.

Want to dive deeper into your company’s financial health? Explore our Cash Flow to Creditors Calculator to understand how much cash is flowing to your creditors and improve your financial strategy.

FAQ