There are two principal methods of presenting cash flow from operating activities - the direct method and the indirect method. Describe these two methods and give an example of what this might look like. I JUST NEED A REALLY SHORT EXAMPLE OF EACH NOTHING REALLY LONG

answer

watching

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Keith LeannonLv2

28 Sep 2019

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

Please write a 250 response to the below discussion and please include 2 scholarly sources.

There are many advantages and disadvantages of the indirect and direct method of preparing the income statement of cash flows. As a company itâs important to know which method better suites your line of business and which method is most accurate. The statement of cash flow is meant to predict future cash flows, evaluate management decisions, determine ability to pay dividends and interests, and shows the relationship of net income to cash flows. There are two ways this can be done, through the indirect method or the direct method.

The indirect method which is used by vast majority reconciles from net income to net cash provided by operating activities. Some advantages of this method includes; the information is more up to date and available, it show combined financial statements, reveals non-cash organizational transactions, and it is a industry standard that is used by most organizations.

The direct method which is used by a minority of companies reports all cash receipts and cash payments from operating activities. An advantage of the direct methods is that it reveals operating cash receipts and payments. A disadvantage to this method is although this method is easier the more transactions a company have the more complicated and time consuming this method gets. This is because each transaction is analyzed to decide whether it involved an actual transfer of cash.

If I had to choose between the two methods I would choose the indirect method because it is used more often, making it easier to compare and contrast amongst other companies if necessary.

cerisegoldfish626

The Statement of Cash flows have become one of the most important financial documents. It is possible to a huge net loss while still generating significant positive cash flows (using depreciation as an example). It is even possible to have billions of dollars in net losses with no effect on the cash position by merely writing off a single item (such as goodwill). It is possible to have a rapidly growing profitable business and become insolvent because one did not manage their cash flow. As it can be seen, the statement of cash flows is extremely important in helping the analyst determine what is happening with corporate finances.

The Statement of cash flows is broken down into three major parts: cash flow from operating activities, cash flow from financing activities and cash flow from investing activities. By carefully studying these documents you can determine the source and use of corporate funds.

Corporations have numerous methods of âmanipulatingâ their books. Some methods are legal some methods are not legal. Based upon your reading in the book, your research on the internet and previous classes please discuss the methods you, as a financial manager could improve gross profit, operating profit and net profit margins.