How to Calculate the Cash Flow Growth Rate

Gather your data. You will need at least three years of net income statements to start. You can find the net income statement within the company's annual report, which can be requested through the company's investor relations department or downloaded via the company website.

Find year 1, 2 and 3 cash flows using the EBIDTA formula. EBIDTA stands for earnings before interest, depreciation, taxes and amortization. Each of these values are clearly stated on the income statement. Use the calculation to find three years of cash flows. Assume the cash flows as calculated with EBITDA for years 1, 2 and 3 are $100,000, $200,000 and $300,000, respectively.

Calculate the growth rate from year 1 to year 2. Subtract year 1 cash flows from year 2 cash flows and then divide by year 1 cash flows. In this example, the growth rate is calculated by subtracting $100,000 from $200,000 and then dividing by $100,000. The answer is 1 or 100 percent.

Calculate the cash flow growth rate from year 2 to year 3. Subtract year 2 from year 3 and then divide by year 2. The answer is $300,000 minus $200,000 divided by $200,000, or 50 percent.