Cash flow calculator: operating cash flow and free cash flow
Enter net profit, depreciation, the change in working capital and capital expenditure to see your cash flow, operating cash flow and free cash flow.
Short answer
Cash flow = net profit + depreciation. Operating cash flow = cash flow − increase in working capital. Free cash flow = operating cash flow − capital expenditure. With 96,000 profit, 45,000 depreciation, 30,000 more working capital and 60,000 invested, cash flow is 141,000 and free cash flow 51,000.
Cash flow calculator
Profit and depreciation from the profit and loss account. Take the working capital increase and capital expenditure from two balance sheets. Any currency works.
- Cash flow (profit + depreciation)
- 141,000
- Operating cash flow
- 111,000
- Free cash flow
- 51,000
Cash flow formulas
| Measure | Formula | Example |
|---|---|---|
| Cash flow | net profit + depreciation | 96,000 + 45,000 = 141,000 |
| Operating cash flow | cash flow − increase in working capital | 141,000 − 30,000 = 111,000 |
| Free cash flow | operating cash flow − capital expenditure | 111,000 − 60,000 = 51,000 |
You add depreciation back because it is a cost but not a payment this year: the money left when you bought the machine. You deduct the increase in working capital because money tied up in extra receivables or stock is not in the bank yet. If working capital fell, enter a negative number and cash flow rises.
This is the indirect method: start from profit and correct for everything that is not cash. The cash flow statement in annual accounts works the same way, in more detail.
Profit is not cash
A business can make a profit and still run short of cash. In the example profit is 96,000, but after extra working capital and investment 51,000 is left to repay loans or pay out. A fast-growing business can have negative free cash flow while profit rises.
How much money goes into working capital you work out with the working capital calculator. To know whether you can pay your bills in the coming weeks, make a cash flow forecast: it looks ahead, this calculator looks back.
Worked example
The same fictional company as on the EBITDA calculator page. The calculator starts with these figures.
| Item | Amount |
|---|---|
| Net profit | 96,000 |
| Depreciation and amortisation | + 45,000 |
| Cash flow | 141,000 |
| Increase in receivables and stock less payables | − 30,000 |
| Operating cash flow | 111,000 |
| Investment in a van and tools | − 60,000 |
| Free cash flow | 51,000 |
If the company repays 40,000 a year on a loan, 11,000 remains. A dividend of 50,000 would therefore reduce the bank balance, even though profit is almost twice as high.
Getting the figures from your accounts
Net profit and depreciation are in the profit and loss account. For the change in working capital, compare receivables, stock and payables on two balance sheet dates; capital expenditure is the increase in fixed assets plus depreciation. Connect your accounting to DigiData and the financial dashboard puts profit, bank balance and working capital side by side per month.
Frequently asked questions
What is the difference between cash flow and operating cash flow?
Cash flow often means the simple version, net profit plus depreciation. Operating cash flow is the cash that actually came in from trading, after the change in working capital.
What is a good free cash flow?
One that covers loan repayments and leaves room for setbacks. Negative is not always bad: in a year with a large investment or strong growth it is normal. Over several years it should be positive.
Is cash flow the same as EBITDA?
No. EBITDA is earnings before interest, tax, depreciation and amortisation. Cash flow starts from net profit, after interest and tax, and adds depreciation back. EBITDA is therefore usually higher.
Why add depreciation back?
Because depreciation is a cost without a payment. The money for the machine left when you bought it. Depreciation spreads that cost over the years, but no cash leaves the bank for it this year.
Profit, bank balance and working capital in one view
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