Ship-to-Shore had earnings after tax (EAT) of $320,000 last year. Its expenses included                     depreciation of $52,000, interest of $40,000. It purchased new equipment for $28,000.  The company also sold stock for $36,000. What is Ship-to-Shore’s net cash flow for last year?

Net Cash Flow = EAT + Depreciation – Interest – Capital Expenditures + Stock Sales

Therefore, Ship-to-Shore’s net cash flow for last year was $300,000 ($320,000 + $52,000 – $40,000 – $28,000 + $36,000). It is a good indicator of the liquidity level possessed by a business at any time. This figure can be used to determine if the company is able to meet its short-term debts, or any other financial obligations like salaries and operational costs.

Cash flow is also a key factor in making investments decisions. To fund their growth plans and to provide a return to shareholders, companies must have enough capital. Calculating net cashflows allows owners to better understand their financial situation, allowing them to make well-informed decisions regarding potential investments and expansion plans.

Monitoring changes in time is also beneficial, as management teams and investors can spot any deviations from the expected trend. This could indicate issues which require more investigation. The information can be used to proactively address problems before they turn into major headaches in the future. This allows companies to stay on top of potential issues and ensure long-term sustainability.