Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

13. Statement of Cash Flows

Operating Activities: Indirect Method

Financial Accounting

13. Statement of Cash Flows

Operating Activities: Indirect Method

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Multiple Choice

What does operating cash flow, as reported using the indirect method, indicate about a company?

The total profit earned by a company after all expenses have been deducted.

The change in cash resulting from the issuance of shares or payment of dividends.

The amount of cash generated or used by a company's core business operations during a period.

The cash inflows and outflows from a company's investing and financing activities.

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Verified step by step guidance

Understand the concept of operating cash flow: Operating cash flow represents the cash generated or used by a company's core business operations during a specific period. It is a key indicator of a company's ability to generate sufficient cash to maintain and grow its operations.

Learn about the indirect method: The indirect method starts with net income and adjusts for non-cash items (e.g., depreciation) and changes in working capital (e.g., accounts receivable, inventory, accounts payable) to calculate operating cash flow.

Identify adjustments to net income: Add back non-cash expenses like depreciation and amortization, subtract gains or add losses from non-operating activities, and adjust for changes in current assets and liabilities.

Understand the significance: Operating cash flow using the indirect method highlights how well a company’s core operations generate cash, independent of investing or financing activities. It helps assess the sustainability of the business model.

Differentiate from other cash flow categories: Operating cash flow focuses solely on core business activities, while investing cash flow relates to asset purchases and sales, and financing cash flow involves debt and equity transactions.