Net Cash Flow
Cash flows of a company are classified into three main heads or, we can say, as per three types of activities. These activities are operating activity, investing activity, and financing activity. Net cash is the sum of revenues (or losses) generated from these activities. Or it is an increment or decrement in the balance of cash and cash equivalents of the company. It can be either negative or positive. The net cash flow calculator is a tool to simplify such calculations.
One can also calculate the net cash flows by subtracting opening cash flows from closing cash flows.
Formula
Cash flows from all the activities. That is, operating activity, investing activity, and financing activity is summed up to provide net cash flows.
A mathematical representation of the above formula of net cash flows is as follows:
Net Cash Flow = Cash Flow from Operating Activities + Cash Flow from Investing Activities + Cash Flow from Financing Activities
About the Calculator / Features
A net cash flow calculator is a user-friendly online tool that helps make the calculation of net cash flows easy and quick. The following details are required to be filled in for an instant result of the calculation. Cash flows from:
- Operating activities
- Investing activities
- Financing activities
Calculator
How to Calculate using Calculator
The user has to input the following three figures into to calculator for quick results.
Cash Flow from Operating Activities
Cash flows from operating activities aim to determine the net result of the company from its core business operations. Or simply say, it is the cash generated by selling goods or services. Operating cash flow is derived by making adjustments of non-cash items and changes in working capital with the net profits of the company.
Cash Flow from Investing Activities
Any increase or decrease in cash due to any increment or decrement in assets of the company in monetary terms is the cash flow of the company from its investing activities. This includes the purchase or sales of machines, investments, or providing loans to any third party or receiving the payment of any such loans, etc.
Also Read: Net Cash Flow
Cash Flow from Financing Activities
Any inflow or outflow of funds due to an increase or decrease in capital and liabilities of the company results in cash flow generated from financing activities. It includes issuing share capital, debentures, paying off loans, distributing dividends, buyback of capital, etc.
Example of Net Cash Flows
Assume that Company X Ltd. is engaged in the manufacturing of article Y. Its cash flows from operating activity, investing activity and financing activity are $ 20,000,000 ($4,500,000) and $1,000,300, respectively.
| Particulars | ($) |
| Cash Flow from Operating Activities | 20,000,000 |
| Cash Flow from Investing Activities | (4,500,000) |
| Cash Flow from Financing Activities | 1,000,300 |
Net Cash Flows = 20,000,000 + (-4,500,000) + 1,000,300 = 16,500,300
Interpretation
As said above, cash flow can be either negative or positive. A positive cash flow determines gains, and negative cash flows represent company losses. In the example above, X Ltd. has a positive net cash flow of $16,500,300 which means the company has generated this cash in the current year from all its operations.
Cautions
Net cash flows represent the difference in cash and cash equivalents of the company in two periods. However, it fails to provide a view of the liquidity and solvency position of the company.
