How to Calculate Net Change in Cash From a Cash Flow Statement

Here's how you can calculate net change in cash with four items from the cash flow statement.

Nov 11, 2015 at 10:09AM

The cash flow statement reveals a lot about a business that you can't immediately find on the income statement or balance sheet. For example, many companies are profitable on the income statement, even though the cash flow statement reveals they're actually burning through cash in every quarter or year.

One metric many investors look to is the "net change in cash," or how much cash went into or out of the business in any time period. Calculating the net change in cash is as easy as adding and subtracting once you know where to look.

How to calculate the net change in cash
Calculating a company's net change in cash is as simple as finding three (sometimes four) entries on a cash flow statement.

The net change in cash is calculated with the following formula:

  • Net cash provided by operating activities +
  • Net cash used in investing activities +
  • Net cash used in financing activities +
  • Effect of exchange rates on cash and cash equivalents (if the company does business in other currencies).

I'll use a public company so that you can follow along with an available example. In this case, I'll use the cash flow statement for Wal-Mart's (NYSE: WMT) 2015 fiscal year, which you can download here. The cash flow statement appears on page 39.

How To Calculate Net Change In Cash

Source: Page 39 of Wal-Mart's annual report for 2015. 

Wal-Mart, and other public companies, make the information you need readily available. Here are the figures for each input:

  • Net cash provided by operating activities: $28.564 billion
  • Net cash used in investing activities: -$11.125 billion
  • Net cash used in financing activities: -$15.071 billion
  • Effect of exchange rates on cash and cash equivalents: -$0.514 billion

If we add these figures up, we get a net change in cash and cash equivalents of $1.854 billion during Wal-Mart's fiscal 2015 year. In other words, Wal-Mart ended 2015 with $1.854 billion more of cash on hand than it had at the beginning of the year.

What the net change in cash tells us
Taken by itself, net change in cash isn't particularly useful. That Wal-Mart had more cash at the end of 2015 than at the beginning of 2015 means just that -- it had more cash. Each input to our calculation can tell us much more about what the company is doing.

Net cash provided by operating activities of $28.564 billion tells us that, through the normal course of business, Wal-Mart generated nearly $29 billion in cash by buying stuff, selling stuff, and paying for operating expenses like labor and cash taxes on profits.

Net cash from investing activities of -$11.125 billion tells us that Wal-Mart made more than $11 billion in capital investments into its business during its 2015 fiscal year. By definition, cash used in investing activities is cash that Wal-Mart spent on investments that have a useful life of more than one year. In retail, that would be things such as new stores, cash registers, computer systems, trucks to move inventory, and so on.

Net cash used in financing activities of -$15.071 billion tells us that Wal-Mart used cash to pay interest on debt, pay down debt, and pay dividends to investors, among other finance-related uses of cash. We can see from the cash flow statement that Wal-Mart used $6.288 billion of cash to pay down short-term debt during the year, while taking in $5.174 billion of cash by borrowing more with long-term debt. In addition, it paid dividends and bought back stock, using more than $7 billion of cash to do so.

Ultimately, it all comes down to context. For new and growing companies that are making big investments in their future, the net change in cash will be very helpful in understanding the company's available liquidity and its ability to continue to make new investments. For older, more established firms with strong profitability and access to financing, it's simply less important. Knowing your way around a cash flow statement, however, is something that has tremendous use for investors. At the end of the day, it's the business's ability to generate cash that matters most.

The next billion-dollar iSecret
The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.


This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors based in the Foolsaurus. Pop on over there to learn more about our Wiki and how you can be involved in helping the world invest, better! If you see any issues with this page, please email us at Thanks -- and Fool on!

the_motley_fool has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers