How to Calculate the Net Cash Flow After Taxes
The three main financial statements are balance sheet, cash flow statement and income statement. Each provides a different set of information about the financial state of the company. The income statement provides an overview of company revenues and expenses. While net income provides an estimate of net cash flow after taxes, a better approximation adds back depreciation expense and subtracts capital expenditures from net income.
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Instructions
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Obtain the income statement and the cash flow statement. The income statement provides an overview of company sales and expenses to arrive at net income. It is published in the annual report, which may be obtained by contacting the investor relations department or downloading a copy from the company website.
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Identify the value for net income. This is located at the bottom of the income statement and includes a provision for taxes. Assume the value for net income is $100,000.
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Add depreciation expense. Depreciation is a non-cash expense. You may find depreciation expense on the cash flow statement. It is usually not a separate line item on the income statement, but is contained within costs related to depreciable assets. Assume the depreciation expense is $10,000: net income of $100,000 plus depreciation expense of $10,000 equals $110,000.
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Calculate net cash flow after taxes. In addition to adding back depreciation, which is a non-cash expense, you must subtract the full cost of assets purchased. Assume $20,000 in assets are purchased throughout the year: $110,000 minus $20,000 equals $90,000.
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