Operating Cash Flow Calculation Examples Help

Operating Cash Flow Calculation Examples, Illustrations, Concept, Sample Help Online


Looking for Operating Cash Flow Calculation Examples, Illustrations and Calculations to do your assignment, homework or project then you are at the right place.

Concept of Operating Cash Flow Calculation

A cash flow statement shows the effects on cash and cash equivalents due to all activities that is operating activities, investing activities and financing activities. The inflow and outflow of cash due to operating activities is known as operating cash flow. This concept help investors and creditors to know how a company is carrying out its operation as operation cash flow does not include secondary sources of revenue. There are two methods of calculating operating cash flow: one is direct method and the other is indirect method.
Under direct method the formula for calculating operating cash flow is as follows
Operating Cash Flow = Total Revenue – Operating Expenses
Under indirect method Operating Cash flow = Net income +/- changes in assets and liabilities + non-cash expenses.

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Operating Cash Flow Calculation Examples Explanation

Let’s take an example and understand the Concept of Operating Cash Flow Calculation.
Example: with the help of information below we will find out operating cash flow by using direct method formula
Net income: $200,000
Depreciation: $20,000
Change in accounts receivable: +$50,000
Change in inventory: -$20,000
Change in accounts payable: -$25,000
Operating Cash Flow = = Net income +/- changes in assets and liabilities + non-cash expenses.
= $200000 – 50000 + 20000 + 20000 – 25000
= 165000
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