# How to Calculate Annualized Cash Flow

A company’s cash flow equals the cash coming into the business minus the cash going out. If you know your business’ cash flow for a period that is shorter than a year, such as a month or quarter, you can annualize it to monitor your company's performance. Annualizing your cash flow converts it to an annual amount that you can compare to cash flows from previous years. Annualized cash flow is only an approximation, though, because it assumes you generate cash flow at the same rate throughout the year. Your actual annual cash flow might differ.

#### 1

Add the cash you received from customer invoices, the cash you received from cash sales and any other cash you brought in during a specific accounting period to determine your total cash received during the period. For example, assume you received $2,000 from cash sales and $1,000 from customer invoices last month. Add $2,000 to $1,000 to get $3,000 in total cash received during the month.

#### 2

Add up the expenses for which you paid cash during the same period to determine your total cash expenses. Cash expenses include items such as advertising, utilities, rent and loan payments. In this example, assume your business paid cash for $1,000 in advertising, $200 for utilities and $600 for rent last month. Add $1,000, $200 and $600 to get $1,800 in total cash expenses.

#### 3

Subtract your total cash expenses from the total cash received to determine your cash flow for the period. If you get a negative number, you have negative cash flow. Continuing with the example, subtract $1,800 from $3,000 to get $1,200 in cash flow for the month.

#### 4

Multiply the period’s cash flow by the number of times that period occurs within one year to calculate your annualized cash flow. To annualize weekly cash flow, you’d multiply it by 52. If you have quarterly cash flow, multiply it by 4. In the example, you have monthly cash flow, so multiply $1,200 by 12 to get $14,400 in annualized cash flow.