Under
U.S. and ISA GAAP, the statement of cash flow can be presented by means of two ways:

1. The indirect method
2. The direct method

The Indirect Method
The indirect method is preferred by most firms because is shows a reconciliation from reported net income to cash provided by operations.

Calculating Cash flow from Operations
Here are the steps for calculating the cash flow from operations using the indirect method:

• (Such as depreciation and amortization)
3. Adjust for gains and losses on sales on assets.
• Subtract out gains
4. Account for changes in all non-cash current assets.
5. Account for changes in all current assets and liabilities except notes payable and dividends payable.

In general, candidates should utilize the following rules:

• (Such as depreciation and amortization)

The following example illustrates a typical net cash flow from operating activities:

Cash Flow from Investment Activities
Cash Flow from investing activities includes purchasing and selling long-term assets and marketable securities (other than cash equivalents), as well as making and collecting on loans.

Here's the calculation of the cash flows from investing using the indirect method:

• Subtract out gains
 Cash from sale of Land 5,000 Purchase of Plant & Equipment (50,000) Net cash flow from investing activities (45,000)

Cash Flow from Financing Activities
Cash Flow from financing activities includes issuing and buying back capital stock, as well as borrowing and repaying loans on a short- or long-term basis (issuing bonds and notes). Dividends paid are also included in this category, but the repayment of accounts payable or accrued liabilities is not.

Here's the calculation of the cash flows from financing using the indirect method:

Cash Flow Computations - Direct Method

Related Articles
1. Investing

### The Essentials Of Corporate Cash Flow

Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
2. Investing

### Cash Flow Statement and Financial Health

A cash flow statement records the amounts of cash and cash equivalents entering and leaving a company.
3. Investing

### Analyze Cash Flow The Easy Way

Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
4. Investing

### Evaluating A Statement Of Cash Flows

The metrics for the Statement of Cash Flows is best viewed over time.
5. Investing

### Fundamental Case Study: Is Amazon's Cash Flow Actually Solid? (AMZN)

Review Amazon's cash flow situation, including its free cash flow yield, operating cash flow from organic growth and cash flow from debt financing.
6. Investing

### Cash Flow Indicator Ratios

Learn about the operating cash flow to sales ratio, free cash flow to operating cash flow ratio and free cash flow coverage ratio.
7. Investing

### Cash Flow Statement: Analyzing Cash Flow From Financing Activities

The financing activity in the cash flow statement measures the flow of cash between a firm and its owners and creditors.
8. Investing

### Analyze Cash Flow The Easy Way

Cash flow statements reveal how a company spends its money and where that money comes from.
9. Investing

### Cash Flow On Steroids: Why Companies Cheat

Pressure to be the best can sometimes push corporations to cheat. Learn how they do it and how to spot it.