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Cash Flow From Assets Formula:
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Cash Flow From Assets (CFA) represents the total cash flow generated by a company's assets. It shows how much cash is available to distribute to both creditors and shareholders after accounting for all investments in working capital and fixed assets.
The calculator uses the CFA formula:
Where:
Explanation: This calculation shows the cash generated from the firm's assets after accounting for investments in capital assets and working capital requirements.
Details: CFA is crucial for assessing a company's financial health, determining its ability to generate cash from operations, and evaluating its capacity to pay debts and distribute dividends to shareholders.
Tips: Enter operating cash flow, net capital spending, and change in net working capital in dollars. All values must be valid numerical inputs.
Q1: What does a positive CFA indicate?
A: A positive CFA indicates that the company is generating more cash from its assets than it's investing, which is generally a positive sign of financial health.
Q2: How is CFA different from free cash flow?
A: CFA represents cash flow available to all investors (both debt and equity holders), while free cash flow typically refers to cash available to equity holders after debt obligations.
Q3: What if CFA is negative?
A: A negative CFA may indicate the company is investing heavily in assets and working capital, which could be positive for future growth but may strain current cash resources.
Q4: How often should CFA be calculated?
A: CFA should be calculated regularly, typically quarterly or annually, to monitor the company's cash generation performance and investment activities.
Q5: Can CFA be used for investment analysis?
A: Yes, CFA is a key metric for investors as it shows the actual cash generated by the business that can be used for debt repayment, dividends, or reinvestment.