Net Increase Calculation: Understanding & Formula

A calculator is handy for determining net financial increases.

In finance, the net increase is the total effective change in cash flow over a firm's last period of activity. It is usually found at the bottom of the cash flow statement. This quantity describes the total change in available cash assets that the firm has realized after accounting for all transactions from operating activities, financing activities and investing activities. Therefore, a calculation of this quantity is a matter of accounting for each of these different activities over the last period, beginning with the previous cash flow balance.

Step 1

Determine the cash flow at the beginning of the period. This quantity is found in the most recent cash flow statement toward the bottom.

Step 2

Calculate the overall contribution from operating activities for the period. This calculation involves adding all customer cash transactions to the beginning cash balance, and then subtracting the operating costs for the period. Operating costs include the applicable costs of maintaining inventory, insurance, property leasing, advertising, payroll, taxes and business loan interest.

Step 3

Calculate the overall contribution from investing activities for the period. This calculation involves adding (to the current cash balance as calculated after accounting for operating activities) the cash generated by investments such as that from the sale of property or the sale of investments, and then subtracting the cash used by investments such as capital expenditures and other purchases.

Step 4

Calculate the overall contribution from financing activities for the period. This calculation involves adding to the running cash balance the cash generated by these activities such as issuance of stocks, new loans and capital financing. The cash used by these activities must be subtracted from the running cash balance and include loan repayments and dividends paid on issued stock.

Step 5

Take the difference between the overall cash balance for the current period and the cash balance for the last period (subtract the beginning cash flow balance from the one that you have just calculated). The result is the net increase (or decrease) in cash flow for the current period.