Describe how to calculate cash flows from operating activities under both the direct and indirect methods.

Describe how to calculate cash flows from operating activities under both the direct and indirect methods.

Expert Solution

Cash Flow from Operating Activities by Indirect Method

Net Profit for the year xxx

Add: Non- Cash and Non-operating Expenses

Depreciation   xxx
Amortization Expense    xxx
Loss on Sale of Assets   xxx
Provision for Taxation   xxx

Less: Non- Cash and Non- operating Incomes

Profit on Sale of Assets xxx
Operating Profit before Working Capital Changes xxx

Adjustments:-

Add: Decrease in Current Assets xxx
Less: Increase in Current Assets xxx
Add: Increase in Current Liabilities xxx
Less: Decrease in Current Liabilities xxx

Net Cash Flow from Operating Activities xxx

Cash Flow from Operating Activities by Direct Method

Cash Receipts from Customers xxx
Cash Paid to Suppliers                                                                             (xxx)
Cash Paid to Employees                                                        (xxx)
Cash Payment for Overheads                                                                  (xxx)
Cash generated from Operations   xxx
Income Tax Paid                                                                               (xxx)

Net Cash Flow from Operating Activities xxx

ekkarill92 answered 2 years ago

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