How do net income and operating cash flow differ?

Modified on Tue, 19 Jun 2018 at 03:57 PM

Net income is the profit a company has earned for a period while cash flow from operating activities measures, in part, the cash going in and out during a company's day-to-day operations. Net income is the starting point in calculating cash flow from operating activities. However, both are important in determining the financial health of a company.


Net Income

Net income is calculated by subtracting cost of sales, operational expenses, depreciation, amortization, interest, and taxes from total revenue. Also called accounting profit, net income is included on the income statement along with all revenues and expenses.

Cash Flow From Operations

Cash flow from operations is part of the statement of cash flows. The cash flow statement is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. 


Source : Investopedia


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