acalculator

What is my cash flow?

Enter net income, the depreciation added back and the change in working capital to see your operating cash flow. Take off capital expenditures to see free cash flow. You can also start from operating income, or type the operating cash flow from a cash flow statement.

Your numbers

Operating cash flow
Free cash flow
$25,000.00

Operating cash flow of $38,600.00 minus $13,600.00 of capital spending leaves free cash flow of $25,000.00.

Operating cash flow
$38,600.00
Capital expenditures
$13,600.00

Free cash flow: $25,000.00. Operating cash flow of $38,600.00 minus $13,600.00 of capital spending leaves free cash flow of $25,000.00.

The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use

How to calculate

Computes operating cash flow from net income or operating income and free cash flow after capital expenditures, for a business over one period.

Example with the default inputs (Operating cash flow From net income, Net income $35,000.00, Depreciation and amortization $3,600.00, Increase in working capital $0.00, Capital expenditures $13,600.00): Operating cash flow of $38,600.00 minus $13,600.00 of capital spending leaves free cash flow of $25,000.00.

Method: Operating cash flow = net income + depreciation and amortization − increase in working capital; or operating income + depreciation and amortization − taxes − increase in working capital; or typed. Free cash flow = operating cash flow − capital expenditures.

  • All amounts cover the same period.
  • An increase in working capital uses cash and is taken off; a decrease frees cash and is added.
  • Arithmetic is exact on the typed decimals; money shows to the cent, halves up.

Machine-readable copies: Markdown, JSON.

Worked examples

Each example is checked against the calculator on every build.

  1. Operating cash flow I know it, Operating cash flow $53,600.00, Capital expenditures $13,600.00 gives Free cash flow $40,000.00.Source: OpenStax, Principles of Finance, 5.6 Operating Cash Flow and Free Cash Flow to the Firm (FCFF) (free cash flow = operating cash flow − capital expenditures; Clear Lake Sporting Goods: 53,600 − 13,600 = 40,000). https://openstax.org/books/principles-finance/pages/5-6-operating-cash-flow-and-free-cash-flow-to-the-firm-fcff: 53,600 − 13,600 = 40,000
  2. Operating cash flow From net income, Net income $35,000.00, Depreciation and amortization $3,600.00, Increase in working capital -$15,000.00, Capital expenditures $13,600.00 gives Operating cash flow $53,600.00, Free cash flow $40,000.00.Source: OpenStax, Principles of Accounting, Volume 1, 16.3 Prepare the Statement of Cash Flows Using the Indirect Method (net income, plus depreciation, minus increases in current operating assets, plus increases in current operating liabilities). https://openstax.org/books/principles-financial-accounting/pages/16-3-prepare-the-statement-of-cash-flows-using-the-indirect-method; OpenStax, Principles of Finance, 5.6 Operating Cash Flow and Free Cash Flow to the Firm (FCFF) (free cash flow = operating cash flow − capital expenditures; Clear Lake Sporting Goods: 53,600 − 13,600 = 40,000). https://openstax.org/books/principles-finance/pages/5-6-operating-cash-flow-and-free-cash-flow-to-the-firm-fcff
  3. Operating cash flow From operating income, Operating income $43,000.00, Taxes paid $6,000.00, Depreciation and amortization $3,600.00, Increase in working capital $2,500.50, Capital expenditures $20,000.00 gives Operating cash flow $38,099.50, Free cash flow $18,099.50.Source: OpenStax, Principles of Finance, 5.6 Operating Cash Flow and Free Cash Flow to the Firm (FCFF) (free cash flow = operating cash flow − capital expenditures; Clear Lake Sporting Goods: 53,600 − 13,600 = 40,000). https://openstax.org/books/principles-finance/pages/5-6-operating-cash-flow-and-free-cash-flow-to-the-firm-fcff (operating cash flow = operating income + depreciation − taxes, less the rise in working capital)
  4. Operating cash flow From net income, Net income -$8,000.00, Depreciation and amortization $5,000.00, Increase in working capital $1,000.00, Capital expenditures $4,000.00 gives Operating cash flow -$4,000.00, Free cash flow -$8,000.00.Source: OpenStax, Principles of Accounting, Volume 1, 16.3 Prepare the Statement of Cash Flows Using the Indirect Method (net income, plus depreciation, minus increases in current operating assets, plus increases in current operating liabilities). https://openstax.org/books/principles-financial-accounting/pages/16-3-prepare-the-statement-of-cash-flows-using-the-indirect-method

How it works

Operating cash flow (OCF) comes one of three ways:

  • From net income: OCF = net income + depreciation and amortization − increase in working capital
  • From operating income: OCF = operating income + depreciation and amortization − taxes − increase in working capital
  • Typed: the net cash from operating activities on a cash flow statement

Then:

  • Free cash flow = OCF − capital expenditures

Rules:

  • Net income, operating income, the increase in working capital and a typed OCF may be negative (a loss, a fall in working capital). Taxes, depreciation and amortization, and capital expenditures are $0 or more. Each amount is at most $1 quadrillion in size.
  • The arithmetic is exact on the decimals you type. Money shows to the cent, with halves rounded up (away from 0).

Assumptions

  • All amounts are for the same period.
  • The increase in working capital is the change in current operating assets minus current operating liabilities. A rise is taken off; a fall (a negative number) is added.

Worked examples by hand

Clear Lake Sporting Goods (OpenStax). OCF = $53,600 and capital expenditures = $13,600. Free cash flow = 53,600 − 13,600 = $40,000.

From net income. Net income $35,000, depreciation $3,600, working capital down $15,000 (enter −15,000). OCF = 35,000 + 3,600 − (−15,000) = $53,600. With $13,600 of capital spending, free cash flow is $40,000.

From operating income. Operating income $43,000, depreciation $3,600, taxes $6,000, working capital up $2,500.50. OCF = 43,000 + 3,600 − 6,000 − 2,500.50 = $38,099.50. With $20,000 of capital spending, free cash flow is $18,099.50.

A loss year. Net income −$8,000, depreciation $5,000, working capital up $1,000. OCF = −8,000 + 5,000 − 1,000 = −$4,000. With $4,000 of capital spending, free cash flow is −$8,000.

Other questions people ask

What is free cash flow?

Free cash flow is the cash a business has left after paying for its operations and its investment in equipment and buildings. It is operating cash flow minus capital expenditures, and it is the cash that can repay debt or pay dividends.

How do I calculate operating cash flow from net income?

Start with net income, add back depreciation and amortization (they cost no cash this period), and take off any increase in working capital. Net income of $35,000, depreciation of $3,600 and a $15,000 fall in working capital give 35,000 + 3,600 + 15,000 = $53,600.

How do I calculate free cash flow?

Take capital expenditures off operating cash flow. Clear Lake Sporting Goods had operating cash flow of $53,600 and spent $13,600 on long-term assets, so its free cash flow was $40,000.

Why does an increase in working capital lower cash flow?

Working capital is current operating assets (such as receivables and inventory) minus current operating liabilities (such as payables). When it rises, cash is tied up in unpaid invoices or stock on the shelf. When it falls, cash is released.

Can free cash flow be negative?

Yes. A loss, a big build-up of stock or heavy spending on equipment can all make free cash flow negative. A growing business often has negative free cash flow while it invests.

What is the difference between cash flow and profit?

Profit counts income and expenses when they are earned or used, including non-cash charges such as depreciation. Cash flow counts money when it actually comes in or goes out. A profitable business can still run short of cash.