The cash flow statement by the indirect method
It starts at profit and ends at the cash that actually moved. The indirect method is the one most used, because it is built from figures the books already hold.
Built forAn accountant who needs a concise treatment that can be applied and traced
When you need it
It starts at profit and ends at the cash that actually moved. The indirect method is the one most used, because it is built from figures the books already hold.
The decision it supports
Start with “The three sections”, then use the explanation to choose the next treatment or check.
What you receive
Work note: The cash flow statement by the indirect method
A structured explanation, every official rate with source and review date, then a direct path to a lesson, tool or track.
An example you can inspect
Apply the decision: The three sections
Operating measures the cash the activity itself generates, and it is the one that matters most: a healthy business funds itself from it. Investing measures the buying and selling of assets. Financing measures borrowing, repayment, capital movements and distributions.
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- The Treasury Accountant trackAvailable now
- Tool: cash flow bridgeAvailable now
The three sections
Operating measures the cash the activity itself generates, and it is the one that matters most: a healthy business funds itself from it. Investing measures the buying and selling of assets. Financing measures borrowing, repayment, capital movements and distributions.
A business with negative operating cash funding itself through one loan after another is living on borrowed time, however profitable its income statement looks.
Why depreciation is added back
Depreciation is a cost that reduced profit without any cash leaving, so it is added back — not because it is a source of cash but because it was never a use of it. The same rule applies to every non-cash charge: provisions and impairment losses.
Then working capital movements are adjusted: a rise in receivables means revenue not yet collected, so it is deducted; a rise in payables means a cost not yet paid, so it is added.