Businesses with higher available cash have the option to grow their operations through expansions and new product launch, consolidate their financial position by buying back own shares, pay higher dividends to boost shareholder confidence or prepay debt obligation. The operating cash flow is important financial information as it captures the cash-generating ability of a company’s core business. Operating Cash Flow = Net Income + Changes in Assets & Liabilities + Non-cash Expenses – Increase in Working Capital Relevance and Use of Operating Cash Flow Formula Step 5: Finally, the operating cash flow formula can be derived by adding up net income (step 1), changes in assets & liabilities (step 2), non-cash expenses (step 3), and deducting increase in working capital (step 4) as shown below. All the line items are available on the balance sheet. Step 4: Next, ascertain the increase in the net working capital requirement, which is an increase in inventories and trade receivables minus an increase in trade payables. Some of the common examples are expenses for depreciation and amortization. Step 3: Next, the non-cash expenses can be taken from the income statement. Step 2: Next, determine the changes in assets & liabilities that refer to changes in certain line items in the balance sheet, which may include movement in deferred tax, stock-based compensation, etc. In most cases, it is the last line item in the income statement. Step 1: Firstly, the company’s net income can be taken from its profit & loss account. The below-mentioned steps can be followed to derive the formula for the operating cash flow of a company: Link: (As-Filed).pdf Explanation of Operating Cash Flow Formula Therefore, Apple Inc.’s operating cash flow for the year 2019 was $69,391 million.
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