Cash Flow Calculator

A cash flow statement shows how cash moves in and out of a business during a specific period. It's one of three essential financial statements (along with income statement and balance sheet). It reveals whether a company can pay its bills, fund operations, and invest in growth—regardless of accounting profits. Investors use it to assess financial health because cash flow is harder to manipulate than earnings.

Operating cash flow comes from core business activities—selling products, paying suppliers, collecting from customers. Investing cash flow involves long-term assets—buying equipment, selling property, making investments. Financing cash flow relates to capital structure—issuing stock, borrowing money, paying dividends, repaying debt. A healthy business typically has positive operating CF, negative investing CF (growth investment), and variable financing CF.

Free cash flow is cash available after maintaining or expanding the asset base. The basic formula is: FCF = Operating Cash Flow − Capital Expenditures. For example, if a company generates $500,000 in operating cash flow and spends $150,000 on equipment, FCF is $350,000. This cash can be used for dividends, debt repayment, acquisitions, or reserves. FCF is a key metric for valuing companies.

Profit is an accounting measure including non-cash items like depreciation and accruals. Cash flow is actual money movement. A company can be profitable but cash-poor (waiting on receivables) or unprofitable but cash-rich (from asset sales). Example: $100,000 profit with $50,000 depreciation and $80,000 in unpaid receivables = $70,000 operating cash flow. This is why both metrics matter.

The indirect method starts with net income and adjusts for non-cash items and working capital changes. Add back depreciation (non-cash expense). Subtract increases in accounts receivable (cash not yet collected). Subtract inventory increases (cash spent on stock). Add increases in accounts payable (cash not yet paid). Formula: Operating CF = Net Income + Depreciation − ΔAR − ΔInventory + ΔAP. Most companies use this method in reporting.