Chartered Financial Analyst with 12 years of experience in corporate finance and investment analysis.
This Net Cash Flow Calculator helps you determine a company’s financial health. Please enter any three of the four values below to solve for the missing variable.
Net Cash Flow Calculator
Net Cash Flow Formula
Formula Source: Investopedia
- NCF = Net Cash Flow
- CFO = Cash Flow from Operations
- CFI = Cash Flow from Investing
- CFF = Cash Flow from Financing
Related Calculators
- Free Cash Flow (FCF) Calculator
- Operating Cash Flow (OCF) Calculator
- Cash Ratio Calculator
- Working Capital Calculator
What is Net Cash Flow?
Net Cash Flow (NCF) is a crucial financial metric that measures the total amount of cash a company generates or uses during a specific period. It is calculated by summing the cash flows from its three main activities: operating, investing, and financing. This figure is found on a company’s statement of cash flows.
A positive NCF indicates that a company is bringing in more cash than it is spending, which is a sign of good financial health and liquidity. This extra cash can be used to pay dividends, reinvest in the business, pay down debt, or save for future needs. Conversely, a negative NCF means the company is spending more cash than it generates, which could signal financial trouble if it persists long-term.
Analyzing NCF provides valuable insights into a company’s ability to manage its cash, fund its operations, and meet its financial obligations. It gives investors and analysts a clearer picture of a company’s true profitability and sustainability, separate from non-cash accounting items like depreciation.
How to Calculate Net Cash Flow (Example)
Let’s walk through an example. A company has the following figures on its cash flow statement:
-
Find Cash Flow from Operations (CFO):
The company generated $100,000 from its core business activities. (CFO = $100,000)
-
Find Cash Flow from Investing (CFI):
It spent $70,000 on new equipment. (CFI = -$70,000)
-
Find Cash Flow from Financing (CFF):
It took out a new loan for $20,000. (CFF = $20,000)
-
Apply the Formula:
NCF = CFO + CFI + CFF
NCF = $100,000 + (-$70,000) + $20,000
NCF = $50,000
-
Result:
The company’s Net Cash Flow for the period is $50,000.
Frequently Asked Questions (FAQ)
A healthy cash flow is when a business consistently generates more cash (positive NCF) than it spends. This allows it to cover operational expenses, invest in growth, repay debts, and provide returns to shareholders without relying on external financing.
Persistent negative NCF indicates a company is spending more than it earns, which can deplete its cash reserves. This may lead to financial difficulties, including the inability to pay bills, invest in new projects, or meet debt obligations, potentially leading to insolvency if not corrected.
NCF provides investors with a clear insight into a company’s actual liquidity and financial health. Unlike net income, which can be affected by accounting rules, cash flow shows the real cash moving in and out, helping investors assess risk, sustainability, and the company’s true ability to generate value.