Question

Name, define, and provide examples of some components of an company’s operating cash flow?

Answer 1

Operating Cash flow will show the cash flow generated from the operating transactions of the company.

We can calculate the same as below,

Net income
Cash flows from operating activities
Adjustments for:
Depreciation
Gain on sale of Equipment
Loss on sale of Equipment
(Increase) / Decrease in Account receivables
Inventory Decrease / (Increase)
Increase in note receivable
Increase in marketable securities
Accounts payable Increase / ( Decrese)
Payroll tax Withhled
Prepaid Expenses
income tax payable
Wages Payable

Every changes in balance of current assets and current liability will affect the cash flow from operating activities.

like if the inventory of the current year is more than last year, it means the our cash is blocked in inventory by selling less stock than we can reduce the difference of this from net profit of the copmay.

If the assets increases it means there is negative cash flow and if the assets decreases it means there is positive cash flow and the same is vice versa for current liabilties.

Every non cash expenses or amortization also added back because these expenses have no cash outflow.