How To Calculate Free Cash Flow in Zoho Books | Arithmix

Calculating free cash flow is an essential part of financial analysis. It helps businesses understand how much cash they have available after accounting for all their expenses. This is important because it gives them an idea of how much money they can use to invest in new projects, pay off debt, or distribute to shareholders. In this article, we'll explore what free cash flow is and when it's valuable to calculate it.

What Is Free Cash Flow?

Free cash flow is the amount of cash a business has left over after accounting for all its expenses, including capital expenditures. It's calculated by subtracting capital expenditures from operating cash flow. Operating cash flow is the cash generated from a company's normal business operations, such as sales and collections from customers. Capital expenditures are the money a company spends on long-term assets, such as property, plant, and equipment.

Free cash flow is important because it represents the cash a business has available for other purposes, such as paying dividends to shareholders, buying back stock, or investing in new projects. It's also an important metric for investors because it can help them determine a company's financial health and future growth potential.

When Is It Valuable To Calculate Free Cash Flow?

Calculating free cash flow is valuable in several situations. For example, if a business is considering investing in a new project, it's important to know how much cash it has available to fund the project. Free cash flow can also be useful when a business is considering paying dividends to shareholders or buying back stock. It can help them determine how much cash they have available to distribute to shareholders without jeopardizing the company's financial health.

Free cash flow is also important when analyzing a company's financial statements. It can help investors determine whether a company is generating enough cash to cover its expenses and invest in future growth. If a company has negative free cash flow, it may indicate that it's not generating enough cash to cover its expenses or invest in future growth. This could be a red flag for investors.

In conclusion, calculating free cash flow is an important part of financial analysis. It helps businesses understand how much cash they have available after accounting for all their expenses. This is important because it gives them an idea of how much money they can use to invest in new projects, pay off debt, or distribute to shareholders. It's also an important metric for investors because it can help them determine a company's financial health and future growth potential.

How Do You Calculate Free Cash Flow in Zoho Books

Zoho Books itself isn’t naturally geared towards letting you calculate complex metrics like Free Cash Flow. As an alternative, teams typically use products like Arithmix to import data from Zoho Books and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Zoho Books, combine it with data from other systems, and create calculations like Free Cash Flow.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Free Cash Flow in Arithmix

Calculating metrics like Free Cash Flow is simple in Arithmix. Once you've created your free account, you’ll be able to import your Zoho Books data, and use it to create natural language formulas for metrics like Free Cash Flow.

Arithmix is designed to give you the power to build any calculations you want on top of your Zoho Books data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.