Cash Flow from Operating Activities

Cash Flow from Operating Activities (CFO) measures the cash generated or consumed by a company’s core business operations within a specific period. It excludes cash from investing or financing activities.

Calculated By:

• Direct Method: Lists cash inflows and outflows from operational transactions.

• Indirect Method: Adjusts net income for non-cash transactions (like depreciation) and changes in working capital.

Significance:

• Core indicator of business sustainability.

• Investors use it to gauge whether a company generates enough cash to maintain operations and fund growth.

• Helps assess operational efficiency independent of accounting practices.