They are highly confused, often misunderstood and mostly underutilized. Here’s what they are and how to use them: 1️⃣ Operating cash flow ⚫ Represents the net cash generated by your company's core operations ⚫ Calculated by adjusting Net Income for non-cash items & changes in net working capital assets. ⚫ Used to assess: >> financial health >> ability to meet its financial obligations >> ability to generate sufficient cash to fund ongoing business operations >> cash generation trends 2️⃣ Investing cash flow ⚫ Represents the net cash generated by your company's investments in long-term assets such as property, plant and equipment (PPE). ⚫ Calculated by totaling the net investments in PPE over the period (purchases less sales of PPE) ⚫ Used to assess: >> investment decisions >> ability to generate returns from its investments 3️⃣ Financing cash flow ⚫ Represents the cash generated by your company's net debt and/or equity activity. ⚫ Calculated by totaling net debt and equity proceeds over the period. ⚫ Used to assess: >> financing choices and risk profile >> ability to raise capital 4️⃣ Free Cash Flow to Firm (FCFF or Unlevered Cash Flow) ⚫ Represents the cash remaining in your business after accounting for cash outflows that support product sales and operations (product costs + operating expenses + working capital) and cash outflows that maintain the capital asset base (capital expenditures). ⚫ Calculated by adjusting Operating Cash Flow for after tax interest expense and investments in capital assets ⚫ Used to assess: >> financial strength and ability to generate sufficient cash for growth and reinvestment >> value based on the discounted cash flow (DCF) valuation. 5️⃣ Free Cash Flow to Equity (FCFE or Levered Cash Flow) ⚫ Represents the cash remaining in your business after accounting for all business expenses, investments in working capital assets, investments in fixed assets, and also all debt obligations. ⚫ Calculated by adjusting Operating Cash Flow for after tax, interest expense, investments in capital assets and net debt payments. ⚫ Used to assess: >> ability to generate cash for distributions to shareholders holders Source: Oana Labes, MBA, CPA - LinkedIn