No matter,what is important is the"net cash flow".

No matter,what is important is the"net cash flow".

Net Cash Flow Calculation

Net Income + Non-Cash Expenses = Net Cash Flow

Items such as depreciation, depletion, and amortization reduce Net Profit but are only accounting entries. These are non-cash items that do not reduce cash flow. Therefore these items are added back to Net Profit to obtain Net Cash Flow.

Why is Net Cash Flow Important?

Net Cash Flow is important because it tells an investor how much cash a company is generating from operations. Note: Net Operating Cash Flow would also consider short term changes in current assets and current liabilities. Net Cash Flow does not.