Accounting › Section O · Cash flows and statement analysis › Topic O.2
The indirect method
Most companies report operating cash flow by starting with net income and correcting it, line by line, for everything that affected profit and cash differently. Learn the handful of adjustment rules and you can rebuild operating cash flow from any income statement and pair of balance sheets.
In this topic
- Starting from net income
- The four adjustments
- Adding back noncash expenses
- Removing gains and losses
- Current operating assets
- Current operating liabilities
- Worked example: Tidewater's operating section
- Worked example: a loss and unearned revenue
- Completing Tidewater's statement
- Common mistakes to avoid
- Key takeaways
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