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Compute Cash Flows From Operations (CFO)

Direct Method- 


Start with cash collections (cash equivalent of sales); cash inputs (cash equivalent of COGS); cash operating expenses; cash interest expense; cash taxes.

 

Operating Cash Flow – Direct Method

Cash collections from customers

$429,980

Cash paid to suppliers

(265,866)

Cash paid for operating expenses

(124,784)

Cash paid for interest

(4,326)

Cash paid for taxes

(14,956)

Operating cash flow

$20,048

 

Indirect Method

Start with net income, subtracting back gains & adding back losses resulting from financing or investment cash flows, adding back all noncash charges, and adding / subtracting asset & liability a/c that result from operations.

 

Net Income

$18,788

Adjustment to net income

Depreciation and amortization

Deferred income tax

Increase in accounts receivables

Increase in inventory

Decrease in prepaid expenses

Increase in accounts payables

Increase in accrued liabilities

7,996

416

(1,220)

(20,544)

496

13,406

712

Operating Cash flow

$20,048

 





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