What are the different types of cash flow formulas?
In business, cash is king. Many companies use a specific cash flow formula for calculating cash flows to ensure that they have sufficient liquidity in business. Common types of cash flow formulas include free cash flow, discounted cash flow, operating cash flow and cash flow statement. The first three are simplistic formulas that require estimating future cash flows and what these data mean for the company's current operations. The statement of cash flows is a professional statement published by all parties to all parties as an official cash position. The basic formula for this calculation is net income plus depreciation and amortization costs, less changes in working capital and capital expenditure. Depreciation and amortization are added back to net income because these data are items without a burst. Expenditure in the profit and loss statement for depreciation and amortization is simply accounting data. Changes in working capital are supplements or subtraction for the currentof assets and current obligations.
discounted cash flow is a formula of cash flows that takes estimated future cash flows and discounts are back to the dollar at present. This helps companies to determine whether new business opportunities are worth initial expenses. For example, a company that expects to earn $ 150,000 in the US (USD) will discount on the current value of the dollar using the cost of the company's capital costs. The cost of the capital interest rate is what companies have to pay for using external funds, whether debt or equity. This cash flow formula is primarily for use as a tool for forecasting of corporate financing.
Operating cash flow is one part of the cash flow statement. This part concerns the inflow of cash and drained directly to the normal business operations of the company. Although a similar formula of free cashThe flows contain several other pieces. The formula is deducted to increase the receivables of accounts, investment income and other income from the company's net income. The company then adds expenditures reported as losses and deducts an increase in payable accounts, depreciation, failures or other accounting data and financing. The result is a real cash flow of common business operations.
cash flow statement includes a formula of operating cash flows and includes the inflow of cash and outflows from investment and financial operations. This allows the company to determine cash flow from the sale of assets and generated from the sale of bonds, issuing shares, paying dividends and other activities including cash sources of the company.