How to calculate operating cash flow from balance sheet?

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Mangum 0 Comments

I am trying to calculate the operating cash flow for a company. What financial statements do I need to get the information that I need? Is the statement of financial position enough and how can I do it?

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score 0 · Answer 1 · 2012-12-02T22:00:26+00:00

Let’s say that you are using the indirect method. You will need to start from the net income (income statement) and then start making adjustments. For example you will need to:

Add (or deduct) the movement in the accounts receivable
Add (or deduct) the movement in the accounts payable
Add (or deduct) the movement in the inventory
Add back non cash items (depreciation and amortization)
Add (or deduct) the finance expense or the finance income

For the movement in the accounts payable, the accounts receivable and the inventory, the following applies.
You take the closing accounts receivable less the opening accounts receivable(current year-previous year). If the difference is positive, you will deduct it. If the difference is negative, you will add the balance. The same applies for the inventory while the opposite applies for accounts payable.