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Cash flow investopedia12/9/2023 ![]() ![]() Capital spending: this is the cost or gain related to the company's fix asset such as the cash used to buy a new equipment or the cash which is gained from selling an old equipment.Changing in net working capital: it is the cost or revenue related to the company's short-term asset like inventory.OCF = (Revenue − cost of good sold − operating expense)* (1−tax rate)+ depreciation* (tax rate)ĭepreciation*(tax rate) which locates at the end of the formula is called depreciation shield through which we can see that there is a negative relation between depreciation and cash flow.OCF = (revenue − cost of good sold − operating expense − depreciation)* (1−tax rate)+depreciation.OCF = earning before interest and tax*(1−tax rate)+ depreciation.OCF = incremental earnings+depreciation=(earning before interest and tax−tax)+depreciation.Operating cash flow of a project is determined by: Operational cash flows: cash received or expended as a result of the company's internal business activities.The total net cash flow for a project is the sum of cash flows that are classified in three areas: ![]() The (total) net cash flow of a company over a period (typically a quarter, half year, or a full year) is equal to the change in cash balance over this period: positive if the cash balance increases (more cash becomes available), negative if the cash balance decreases. This includes transactions involving dividends, equity, and debt. ![]()
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