Reconcile net income with the actual cash generated from business operations using the indirect method.
Accounting to Cash
Cash Generation
Operating Cash Flow$113,000Cash from Operations
Net Income to Cash Bridge
About this calculator
Overview
Reconcile net income with the actual cash generated from business operations using the indirect method.
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Pro Tips
What is Operating Cash Flow (OCF)?: OCF is the amount of cash a company generates from its regular business activities. It is the first section of a Cash Flow Statement.
Why do we add back Depreciation?: Depreciation is an accounting expense that reduces net income but does not involve an actual cash outflow. To find the cash position, we must add it back.
How do Working Capital changes affect cash?: An increase in assets (like Inventory or Receivables) is a 'use' of cash (it subtracts from OCF). An increase in liabilities (like Payables) is a 'source' of cash (it adds to OCF).
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Fun Facts
"Companies can have high net income but zero cash flow if they are unable to collect payment from customers (high receivables)."
"OCF is much harder to manipulate than Net Income because it represents actual dollars in the bank."
"Lenders prioritize OCF over almost any other metric because it shows the firm's ability to service its debts."
