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Cash flow from operations = Net Income +/- Non cash exp +/- Changes in Working capital
Now the Net Income after Interest, it means the CFO includes interest

2007-04-16 05:54:47 · 3 answers · asked by Anonymous in Business & Finance Investing

3 answers

if its interest income then its not excluded however if its interest from credit charges then it should be deductable or a percentage anyway.

2007-04-16 06:02:41 · answer #1 · answered by Anonymous · 0 0

Financing activities are apart from operations. The cash flow from operations is the money that comes in from the business operations. Interest paid or received is not generated through sales of goods -- but through borrowing or investing.

Net income combines income from operations with income or expenses from financing.

2007-04-16 13:38:54 · answer #2 · answered by Ranto 7 · 0 0

Operations means the basic plain vanilla work done by the Corporation like if it manufactures widgets then operation means the processes involved in manufacturing and distributing widgets. Interest payment is a Financing operation which has nothing to do with the basic operations of manufacturing. So it is not included in the cash flow from operations.
Addendum:
I shall explain why Operations is differnet from Financing in the perspective of risk. Operations are endowed with 'Operational risk' and this is due to excess 'Fixed cost' in the Operational structure. In Financing there is the chance of 'Financial risk' which is due to excess of 'leverage' in the financial structure. So Operations and Financing are separately considered like you asked in your question.

2007-04-16 14:12:15 · answer #3 · answered by Mathew C 5 · 0 0

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