what is operating activities in cash flow

Cash flow from operating activities (CFO) is the amount of cash a company generates from its ongoing, regular business activities, such as generating revenue, paying expenses, and funding working capital. It is the first section depicted on a cash flow statement, which also includes cash from investing and financing activities. The cash flow from operating activities section can be calculated using either the indirect method or the direct method. The indirect method starts with net income and then shows the adjustments needed to reconcile the net income with the cash flows from operating activities, while the direct method calculates cash inflows and outflows directly. The formula for calculating cash flow from operating activities is: Net cash from operating activities = Net income +/− depreciation and amortization +/− Change in working capital. Investors examine a company’s cash flow from operating activities to determine where a company is getting its money from, and it is an important benchmark to determine the financial success of a companys core business activities.