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Accounting
Indirect Method
A way to prepare the operating section of the statement of cash flows that starts with net income and adjusts for non-cash items.
Most companies use the indirect method because it's easier and links directly to the income statement. It shows how accrual accounting numbers turn into real cash.It's like starting with your reported test score and then adding back points the teacher didn't count so you see the true cash score.
Real world: You begin with net income of $50,000, then add back $8,000 of depreciation and subtract $3,000 of accounts receivable growth to get cash from operations.
💡 The indirect method is the most common because it starts with the profit number everyone already knows and then shows the cash adjustments.