Operational Cash Flow: What It Is and How to Calculate

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Operational Cash Flow
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What is and how to do Cash Flow?

What is Operational Cash Flow?

Operating Cash Flow is the result of financial inflows and outflows of a business taking into account only the transactions required for the operation. In other words, from this calculation, any kind of cost or financial gain is excluded.

The difference between the operating cash flow for the cash flow is that it accounts for all operations of the company, even those not directly linked to the operation. For example, bank interest, acquisitions of fixed assets, income from applications, among others.

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Because it is not a faithful portrayal of all of the company's operations, the operating cash flow will not show the bank balance correctly, but rather as it would be if the company were focused on production alone.

What is the Importance of Operating Cash Flow?

This is an important indicator to be following because it will tell you how much money you could generate for your cashier. And this, without getting in the way of other results that may lead you to the wrong conclusions about the success or failure of your operation.

For example, suppose you had a month with $ 20.000,00 of Operational Cash Flow but decided to pay a $ 10.000,00 fine to deliver your office ahead of contract time. If it was all mixed up, you'd think your result was half what it really was and expect a bad month next, and that's not the reality.

Summary of Operating Cash Flow

The following is a summary of a simplified cash flow to see in which position the cash flow is in a financial statement.

Recipe ---------- R $ 20.000,00
Expenses: --------- R $ 8.000,00
LAIR: ----------- R $ 12.000
Taxes: --------- R $ 4.000,00
Operating Cash Flow: - R $ 8.000,00

In other words, we can understand the formula of Operational Cash Flow as: LAIR (Profit Before Income Tax) - Taxes

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Are you going deeper into building your cash flow and business outcome statement? Leave your comment with questions that we will help you! In addition, we have a cash flow sheet already ready in excel!

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3 COMMENTS

  1. I am trying to analyze a cash flow from a small retailer, where I only have data of the entries represented by the inscriptions, sponsorship and loans of the companies and the exits that are medals, etc. I do not know how to do to know if the company is viable or not? and what profit from it?

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