How to Compute Operating Cash Flow
Cash flow is a generic term referring to the movement of cash into or out of a business. A business may generate cash from loans it takes out or from interest and dividends received, none of which are operational activities of the business. Operating cash flow is cash provided specifically by the operating or trading activities of the business. It takes into account changes in working capital, but does not include non-cash expenses such as depreciation.
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Instructions
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Add receivables at the start of the period to invoices raised during the period and deduct receivables at the end of the period to calculate cash receipts from customers.
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Add payables at the beginning of the period to invoices received during the period and deduct payables at the end of the period to calculate cash paid to suppliers.
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3
Total cash paid to and on behalf of employees in the period.
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4
Deduct cash paid to suppliers and employees from cash receipts from customers to give the cash generated from operations.
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Deduct interest and income taxes paid in the period to provide the net cash flow from operating activities, or operating cash flow.
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