Cash flow after taxes isn't a difficult calculation. Once Cash Flow Before Taxes is determined, it's a simple matter to subtract tax liability to determine Cash Flow After Taxes. It's possible that, due to accrued losses deductible in later years, that this after tax cash flow could actually be a positive number and be higher than the cash flow before taxes.
Difficulty: Easy
Time Required: 5 minutes once you know the Cash Flow Before Taxes
Here's How:
- Determine the cash flow before taxes.
- Subtract the income tax liability, state and federal.
The result is the Cash Flow After Taxes.
- Another method of calculating CFAT is:
CFAT = Net Income + Depreciation + Amortization + Other Non-Cash Charges
They really aren't that different, as you're just adding back cash items that were subtracted for the Cash Flow Before Taxes calculation. In the CFBT calculation, debt service is subtracted from Net Income, as it's a cash outflow. However, the depreciation and interest are both deductible for taxes, and thus are added back to get the CFAT.
