Finimpact

Final Word

Calculating your business’s operating cash flow can help you gauge your financial health as a business. As for how to find operating cash flow, it can be fairly simple depending on how many expenses your business has on a regular basis. Armed with this information, you can ensure that you don’t end up in the red and monitor your business’s health.  

FAQs about Operating Cash Flow

What Are the Three Types of Cash Flows?

Another part of the cash flow world is cash flow statements which lay out how you spend your business’s money. You’ll find three types of cash flow statements, including:

  • Operating - In an operating statement, you’ll calculate how much you spend on necessary costs to operate your business. This can be employee wages, rent or mortgage payments, and utility payments. 
  • Investing - Investing statements value the cost of a company’s investments, which can include property investments, stocks, or long-term investments. 
  • Financing - Financing statements show the influx of cash a business gets from shareholders, investors, or owners. 
How is Operating Cash Flow Different from Net Income and Earnings Per Share?

Net earnings looks at a larger picture than operating cash flow. With net income, you’re looking at your business's total income generated from sales and investments minus all expenses. Operating cash flow focuses more on the day-to-day activities of your business over a shorter period of time.

As for earnings per share, this is simply a business’s earnings divided by all outstanding common stock shares. This number is more important for corporate companies since it shows how much a business makes per stock share.

What’s the Difference Between the Formulas for Operating Cash Flow and Free Cash Flow?

Operating cash flow and free cash flow are nearly identical. While operating cash flow is a measure of how much cash your business makes through its operations, free cash flow measures how much the business makes after taking out capital expenditures.

Capital what?

Capital expenditures are any cash a business uses to improve or maintain any physical assets. This can include the property the business is run in or the equipment it uses. Additionally, while operating cash flow helps you understand if you have enough to pay your bills, free cash flow helps you, your lenders, or your investors understand how much you really have left that could end up back in your pockets

About the Author

Christopher Murray

Christopher Murray

Personal Finance Expert

Christopher Murray is a professional personal finance and sustainability writer and editor who enjoys writing about everything from budgeting and saving to unique investing options like SRI and cryptocurrency.

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