How to Calculate Cash Flow (Formula & Examples)
Share this article:
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Why Understanding Cash Flow Is Important
Anticipating inventory needs, including how to pay for supplies Determining if your prices are reasonable Projecting your fixed expenses versus seasonal revenue
How is Cash Flow Calculated?
Operating Cash Flow Formula
Add the starting balance and revenue to determine your cash in. Add up all expenses to determine cash out. Subtract cash out from cash in.
Operating Cash Flow Example
Free Cash Flow Formula
Determine operating cash flow (see the formula in the previous section). Add up capital expenditures. Subtract capital expenditures from operating cash flow. (Net Operating Profit – Taxes) – Net Operating Capital Investment = Free Cash Flow Sales Revenue – (Operating Costs + Taxes) – Operating Capital Investments = Free Cash Flow
Free Cash Flow Example
Cash Flow Forecast Formula
Determine cash in. Determine cash out. Subtract cash out from cash in. Do this month over month to make an educated guess for the coming months. Cash flow can wax and wane depending on the season. Therefore, something like a summer-only direct cash flow amount may not apply to the winter. Get your current balance from your balance sheet. If you have previous ones, check those as well. Compare it to your profit and loss statements to get a decent estimate of your monthly cash in and cash out.
Cash Flow Forecast Example
Discounted Cash Flow Formula
Discounted Cash Flow Example
Managing Cash Flow Problems
Using Accounting Software
Hiring a Bookkeeper
Refining Your Budget
Applying for a Line of Credit
Other Important Financials to Know About
Final Thoughts on Calculating Cash Flow
About the Author
Share this article: