Cash flow from assets is a financial metric that measures the cash generated or used by a company’s operating, investing, and financing activities. It is also known as cash flow from operations or cash flow from operating activities.
The cash flow from assets is calculated by subtracting a company’s capital expenditures (money spent on long-term assets) from its operating cash flow (cash generated from the company’s core operations). The resulting figure reflects the net cash flow generated or used by a company’s operating and investing activities.
The formula for calculating cash flow from assets is as follows:
Cash Flow from Assets = Operating Cash Flow – Capital Expenditures
Operating cash flow can be calculated using the indirect method, which starts with net income and adjusts for non-cash items such as depreciation and changes in working capital.
Capital expenditures include money spent on purchasing or improving long-term assets such as property, plant, and equipment.
A positive cash flow from assets indicates that a company is generating more cash from its operating and investing activities than it is spending on long-term assets. This is generally a positive sign, as it suggests that the company is able to fund its growth and pay dividends to shareholders. A negative cash flow from assets indicates that a company is spending more on long-term assets than it is generating from its operating activities, which may suggest that the company is facing financial difficulties or is investing heavily in its future growth.