What are 'Non-Operating Cash Flows'

Non-operating cash flows are inflows and outflows of cash that are not related to the day-to-day, ongoing operations of a business. These cash flows are associated with cash flows from investing and cash flows from financing on a company's statement of cash flows.

BREAKING DOWN 'Non-Operating Cash Flows'

A company's statement of cash flows is broken down into three main sections: cash flows from operations, cash flows from investing and cash flows from financing. Cash flows from operations start with net income and then add or subtract depreciation and amortization and changes in working capital components including accounts receivable, accounts payable, inventories and accrued liabilities. The section of operating cash flows will have other adjustment items, depending on the company.

Non-operating cash flows are part of the other two sections of the cash flow statement. The first non-operating cash flow section is cash flows from investing. The principal items included in this section are capital expenditures, increases and decreases in investments, cash paid for acquisitions and cash proceeds from asset sales. The second non-operating cash flow section is cash flows from financing. The major line items are proceeds from short-term borrowings, payments of short-term borrowing, proceeds from long-term debt, payments of long-term debt, proceeds from the issuance of equity, repurchases of common stock, and payments of dividends.

Using Non-Operating Cash Flow Data

Non-operating cash flows demonstrate how a company uses its operating cash flows each period and how it deploys free cash flows (basically, operating cash flows less capital expenditures), or how it finances its investing activities if it does not have any free cash flow (FCF) or sufficient FCF.

For example, suppose a company has operating cash flows of $6 billion in its fiscal year and capital expenditures of $1 billion. It is left with substantial FCF of $5 billion. The company can then choose to use the $5 billion to make an acquisition, which would appear in the cash flows from investing section, repurchase $2 billion of common stock and pay $2 billion in dividends, which would both appear in the cash flows from financing section. Suppose, though, that FCF was only $2 billion and the company was committed to buying another company for $1 billion and paying $2 billion in dividends. It could borrow $1 billion in long-term debt, which would show up in the cash flows from financing section.

RELATED TERMS
  1. Cash Flow From Investing Activities

    Cash flow from investing activities reports the total change ...
  2. Price to Free Cash Flow

    Price to free cash flow is an equity valuation metric used to ...
  3. Operating Cash Flow Margin

    Operating cash flow margin measures cash from operating activities as ...
  4. Business Activities

    Business activities are any activity that is engaged in for the ...
  5. Sales To Cash Flow Ratio

    The sales to cash flow ratio shows how efficiently a business ...
  6. Trailing FCF

    Trailing free cash flow (FCF) measures the company's free cash ...
Related Articles
  1. Investing

    Analyze cash flow the easy way

    Learn the key components of the cash flow statement, how to analyze and interpret changes in cash, and what improved free cash flow means to shareholders.
  2. Investing

    Corporate Cash Flow: Understanding the Essentials

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself. Learn how to read the cash flow statement.
  3. Investing

    Fundamental Case Study: Is Amazon's Cash Flow Actually Solid? (AMZN)

    Review Amazon's cash flow situation, including its free cash flow yield, operating cash flow from organic growth and cash flow from debt financing.
  4. Investing

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  5. Investing

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  6. Small Business

    Understanding Cash Flow

    Learn about the different types of cash flows and the importance for businesses to properly manage their cash flows.
  7. Investing

    Cash flow statements: Reviewing cash flow from operations

    Discover why cash flow from operating activities is significant to businesses, and learn the direct and indirect methods for calculating it.
  8. Investing

    How to Improve Your Cash Flow in Manufacturing

    Here are 10 ways to to improve a manufacturer's cash flow.
RELATED FAQS
  1. What is the difference between cash flow and free cash flow?

    Learn about the main differences between cash flow and free cash flow. In addition to the differences, learn how to calculate ... Read Answer >>
  2. What are some examples of how cash flows can be manipulated or distorted?

    Read about some of the most common accounting techniques that can be used to manipulate the operating cash flow on a company's ... Read Answer >>
  3. What's the formula for calculating free cash flow?

    Free cash flow is the cash left over after a company pays for its operating expenses and capital expenditures. High free ... Read Answer >>
  4. What is the difference between cash flow and fund flow?

    See how cash flow and fund flow differ from each other, and why fund flow can be used very differently by accountants and ... Read Answer >>
  5. What is the difference between cash flow and revenue?

    Understand the difference between cash flow and revenue as they relate to corporate accounting and the financial evaluation ... Read Answer >>
  6. What's more important, cash flow or profits?

    Learn about the different effects of cash flow and profit have on a business and how you can use the information for your ... Read Answer >>
Hot Definitions
  1. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  2. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  3. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  4. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  5. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  6. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
Trading Center