What is Cash Flow From Operating Activities?

If you have a business business, of course you are no stranger to cash flow. You must also be familiar with some of the components in cash flow yaitu cash flow from operating activities, financing activities, and investing activities.

In this article you will find an explanation related to cash flow from operating activities, because this operational activity is very important to analyze cash flow.

Check out the following article to find out cash flow from operating activities!

What is that cash flow from operating activities?

Cash flow is a statement of cash inflows and outflows of a company or individual used to meet needs. As mentioned above, if one of the components cash flow is cash flow from operating activities or cash flow operational activities.

Operational activity cash flow ish financial records that record the amount of cash obtained by the company. The cash flow formula for operating activities can be done using two methods, namely the direct method and the indirect method.

You also need to know to count cash flow There are two types of operational activities, namely the direct method and the indirect method.

Method cash flow operational activities

Reporting from Gocardless, calculation of direct method and indirect method cash flow operational activities are as follows:

Direct Method: With the direct method, you will record all transactions from your company and also have to display the actual inflow and outflow information.

The direct method formula: Total revenue – COGS – Operating Expenses

Indirect method: With the indirect method, you have to start with net income and also adjust for amortization and depreciation (i.e. non-cash component items).

Indirect method formula: Net Profit + Depreciation – Taxes – Changes in Working Capital.

The formula for calculating net income is = Gross Profit – Operating Expenses. 

Gross Profit = Net Sales – Cost of Goods Sold.

How to calculate cash flow from operating activities

Operational cash flow comes from sales, namely the amount of cash obtained, employee salaries, rental expenses, depreciation, or settlement of receivables.

The formula are operating costs + interest earned/ cash inflows - taxes + working capital expenses

Example of calculation cash flow operational activities are as follows:

ABCD Company in the January 2022 period received product sales of Rp. 28.000.000, then earned interest from receivables of Rp. 2.000.000. Then, paid rent tax of Rp. 3.000.000 and paid employee salaries of Rp. 6.000.000.-

Then these numbers can be entered into a formula like the following:

(28.000.000 + 2.000.000) - (3.000.000 + 6.000.000) = 30.000.000 - 9.000.000 = 21.000.000.-

The cash flow of ABC Company's operating activities in the January 2022 period was Rp. 21.000.000.-

Well, that was a brief discussion regarding cash flow from operating activities or cash flow operational activities. You can calculate manually or use services or accountancy online as Journal by Meraki.