Operating cash flow quantifies the cash generated by a company from its core operations over a given time frame. As Microsoft Excel implements various calculation formulas, you can easily calculate the operating cash flow with formulas in Excel. If you have doubts about this, this article is for you. In this article, we discuss the operating cash flow formula in Excel. So, let’s get started.
What Is Operating Cash Flow?
Most likely, you have heard the term “cash flow”. It denotes the number of cash inflows and outflows over a certain period. Operating cash flow, one of the three types of cash flow, provides a clear indication of the company’s current status. A company’s operating cash flow demonstrates whether it can regularly generate enough cash to support and grow its activities. The operating cash flow. It represents the first section of the cash flow statement of a certain organization.
How to Calculate Operating Cash Flow Using Formula in Excel:
We have discussed 2 simple and easy methods of operating cash flow formulas. One is the Direct method, and the other is the Indirect method. We also describe the annual operating cash flow. Here, we have taken a dataset of the Cash Inflows and Cash Outflows and then we will calculate the Net Operating Cash Flow.
Not to mention, we have used the Microsoft 365 version. You can use any other version at your convenience.
1. Generic Formula of Operating Cash Flow with Direct Method
The Direct method helps a company to monitor each cash entry and the cash outflow over a defined period. This method is pretty straightforward and very precise. The generic formula for this method is
In this case, cash inflows refer to a company’s various cash revenues. On the other hand, all forms of operating expenses paid in cash are included in cash outflows. Follow the steps below to get a proper visualization.
- First of all, make a basic layout for the Direct method just like the image below. You have to enter the cash inflow and cash outwards in the corresponding cells.
- Sequentially, insert your values in your dataset to give it a proper outlook.
Note: Here, the negative signs represent the outgoing cash. So, we need to subtract them from our calculation.
- Then, we calculate the Net Operating Cash Flow by using the SUM function.
- For this operation, firstly, move to cell C14 and input the formula.
It will add the value of C8:C12 and give you the result.
Finally, the result looks like the image below after pressing ENTER.
Read More: How to Calculate Annual Cash Flow in Excel
2. Indirect Method of Operating Cash Flow
Companies substantially more frequently use the Indirect method than the Direct one to determine operating cash flow. It is quite simple to use the Indirect method as the company has an accessible financial statement to estimate the operating cash flow. The formula for the Indirect method stands for
So, the main components required in this formula are:
- Net Income: We take net income into account as a starting point.
- Non-Cash Expenses: These include Depreciation, Amortization, Stock-Based Compensation, Deferred Income Tax, and other non-cash items.
- Assets and Liability: It contains the elements like Account Receivable, Inventory, Accounts Payable, Accrued Expenses, and Deferred Revenue.
For calculating the Indirect method, follow the steps.
- In the very beginning, create an outline for the Indirect method just like the image below.
- Afterward, insert the components with their corresponding amount.
- Then, go to cell C14 and insert the formula.
- Press ENTER.
Eventually, you will get the result like the image below.
How to Calculate Annual Operating Cash Flow Using Formula in Excel
Moreover, you can also calculate the annual operating cash flow. It is almost the same as we discussed in the other 2 methods. Actually, it calculates the annual cash disbursement of a company. We have added a dataset where we took cash flow for 3 years. Follow the steps to calculate the annual operating cash flow.
- Firstly, create the layout and insert the components with their values. See the image to get a clear conception.
- Secondly, select cell C15 and enter the formula.
basically, it adds the values from C5 to C13 with their corresponding signs.
- Eventually, press ENTER and drag the Fill Handle tool to cell E15.
Finally, the result seems like the image below. As you can see, we calculate the year-wise Net Operating Cash Flow.
Using Operating Cash Flow Formula Calculator in Excel
Fortunately, you can utilize the Excel template that we provided in the Download section as an operating cash flow formula calculator in Excel. That means if you insert the values of cash inflows and cash outflows, you’ll get the net operating cash flow in the C14 cell.
Download the following practice workbook. It will help you to realize the topic more clearly.
That’s all about today’s session. And these are some easy methods to operate cash flow formulas in Excel. Please let us know in the comments section if you have any questions or suggestions. For a better understanding, please download the practice sheet.