You’ll find these financial numbers in your company’s balance sheet or income statement. Capital Expenditure refers to fixed business assets like land and equipment.Working Capital is the money used for running the daily activities of a business.Depreciation and Amortization: Depreciation accounts for the reduction of a current asset’s value over time, while amortization means spreading the cost of an intangible asset over its lifetime.Net Income is the company’s profit or loss after all its expenses have been deducted.How to Calculate Free Cash FlowĪdd your net income and depreciation, then subtract your capital expenditure and change in working capital.įree Cash Flow = Net income + Depreciation/ Amortization – Change in Working Capital – Capital Expenditure. Free cash flow helps companies to plan their expenses and prioritize investments. It is the leftover money after accounting for your capital expenditure and other operating expenses. While a cash flow statement shows the cash inflow and outflow of a business, free cash flow is a company’s disposable income or cash at hand. Here’s how this formula would work for a company with the following statement of cash:Ĭash Flow = $30,000 +(-) $5,000 +(-) $5,000 + $50,000 = $70,000 Free Cash Flow Formula This is interpreted as Ĭash Flow = Cash from operating activities +(-) Cash from investing activities +(-) Cash from financing activities + Beginning cash balance Then, add the result to your beginning cash balance. How to Calculate Cash Flow Using a Cash Flow StatementĪdd or subtract all the cash from operating activities, investing activities, and financing activities. Companies use these data sets for cash flow calculations. Some businesses also list non-cash expenses in their statements.
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