Cash flow from operations

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Cash flow from operations

A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses that are deducted in calculating net income.

Cash Flow From Operations

A ratio of a company's cash flow to either its net income or operating income. The latter ratio provides a more accurate description of a company's cash flow, while the former takes into account the effects of non-operation transactions on income. Cash flow from operations shows the difference, if any, between a company's reported income and actual cash on hand.
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Cash flow margins ratio shows the relationship between sales and cash flows from operations. This is the ability of a company to translate sales into cash.
Cash flows from operations were sufficient to meet dividend payments in 2004 and 2006.
In all three years, the company generated sufficient cash flows from operations to pay interest.
There are at least three ways of factoring the bad debts provision into the reconciliation of net income and cash flows from operations, as illustrated in Table 2.
A slightly more detailed reconciliation of net income and cash flows from operations involves adjusting net income for changes in both accounts receivable - gross and allowance for uncollectible accounts (see Alternative B column of Table 2).
A much more complex and potentially confusing reconciliation of net income and cash flows from operations results when net income is adjusted for the bad debts provision and the change in accounts receivable (see Alternative C column of Table 2) [TABULAR DATA FOR TABLE 2 OMITTED].
Common-sized percentages are computed by dividing each element contained in the cash flows from operations section by total cash flows from operations.
The common-sized statement of cash flows from operations, computed for the 43 utility firms in this study, is presented in Table 1 quickly reveals two key factors regarding the cash flows from operations: net income and the adjustment for non-cash expenses are the significant components in cash flows from operations, and variability is TABULAR DATA OMITTED great among the three industries and among individual firms within each industry.
The percentage of cash flows from operations provided by net income will facilitate this assessment.
The ratio tells investors the number of times cash outflows for interest are covered by cash flows from operations. The ratio, when compared with the industry norm, indicates company liquidity and its ability to meet interest commitments.
A better measure would be cash flows from operations before interest and taxes divided by interest payments.
Both ratios indicate the time period required to free the company from its obligations using retained cash flows from operations to repay the debt.