🔑Always ask yourself if a transaction is good or bad for cash when preparing the cash flow statement.
💼The indirect method requires adjustments for non-cash items and timing differences.
📈Cash flows from operations focus on day-to-day business activities and sales revenue.
💰Cash flows from investing activities involve purchases of assets like property, plant, and equipment.
💸Cash flows from financing activities include long-term debt and equity financing.
What are the two methods for preparing the cash flow statement?
—The two methods are the direct method and the indirect method. The indirect method is commonly used, especially for publicly traded companies.
What is the difference between the direct method and the indirect method?
—The direct method directly lists the sources and uses of cash, while the indirect method starts with net income and adjusts for timing differences and non-cash items.
How do you calculate cash flows from operations?
—To calculate cash flows from operations, you start with net income and then make adjustments for non-cash items and timing differences.
What are cash flows from investing activities?
—Cash flows from investing activities include purchases or sales of assets like property, plant, and equipment.
What are cash flows from financing activities?
—Cash flows from financing activities include long-term debt and equity financing, such as issuing stock or taking on additional debt.
00:23The video provides a comprehensive guide to preparing the cash flow statement using the indirect method.
02:31The difference between the direct and indirect methods lies in the way information is presented, with the indirect method starting with net income and making adjustments.
04:01Cash flows from operations focus on day-to-day business activities, including sales revenue and expenses.
05:52Cash flows from investing activities involve purchases or sales of assets like property, plant, and equipment.
08:38Cash flows from financing activities include long-term debt and equity financing, such as issuing stock or taking on additional debt.
