See how cash flow forms the foundation for returning dividends to shareholders or add real value to their investment. Strategic Focus calculates the different cash flows and shows their relationship ie how net cash flow, marginal cash, operational cash and free cash flow are connected. Business valuations are calculated using free cash flow and economic profit concepts.
Cash flows from activities
Cash flow from operating activities i.e. operational cash is cash inflows from operations less payments from changes in working capital and non-current assets. This is the pre-tax position. When operational tax is included the result is free cash flow (FCF). Net cash includes capital considerations also.