Simple cash flow measures a company's basic ability to generate cash from its accounting profit. It is calculated by adding depreciation, amortisation and provisions to net income, items that do not involve a real cash outflow but reduce profit. That is why this indicator offers a first approximation to operating cash flow, useful for knowing whether the business turns its profits into real liquidity. Although it does not take changes in working capital into account (customers, suppliers, inventories), it lets you compare years, detect deterioration in cash generation and assess the sustainability of the business. A positive, stable simple cash flow usually indicates that the company covers its operations with its own resources without constantly resorting to external financing.

• Net income
• Depreciation, amortisation and provisions

• Positive and growing simple cash flow → good internal generation of liquidity.
• Sustained stagnation or decline → lower self-financing capacity.
• Negative → the company does not turn accounting profit into cash; possible cash strain.

• EBITDA
• CFO (cash flow statement)
• Debt/Cash flow
• Earnings quality