Operating cash flow


As this example illustrates, operating cash flow is not the same as net income, because depreciation and interest are subtracted out when net income is calculated. If you will recall our earlier discussion, we don't subtract these out in computing operating cash flow because depreciation is not a cash expense and interest paid is a financing expense, not an operating expense.

Net Capital Spending Suppose that beginning net fixed assets were $500 and ending net fixed assets were $750. What was the net capital spending for the year?

From the income statement for Dole, we know that depreciation for the year was $150. Net fixed assets rose by $250. Dole thus spent $250 along with an additional $150, for a total of $400.

Change in NWC and Cash Flow from Assets Suppose that Dole Cola started the year with $2,130 in current assets and $1,620 in current liabilities, and that the corresponding ending figures were $2,260 and $1,710. What was the change in NWC during the year? What was cash flow from assets? How does this compare to net income?

Net working capital started out as $2,130 - 1,620 = $510 and ended up at $2,260 - 1,710 = $550. The addition to NWC was thus $550 - 510 = $40. Putting together all the information for Dole, we have:

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