After discussing cash in’s and cash out’s we now come to the calculation of the cashflow. It starts from your profit after tax:
From this profit after tax the non-cash costs are removed, and the working capital is taken into account.
We’ve still one important expense to consider: if the company pays off its loans, it doesn’t just pay interests. The capital repayments are also an important expense which impact the cashflow. Adapting the cashflow for these repayments brings us to the Free Cashflow.
Free Cash flow = Cash flow – Capital repayments
The following video gives you in 2:30 minutes a short overview of cashflow:
For a more profound understanding you can watch this video It will takes a bit more time, 13:30 minutes precisely, but it’s worth it.