For Cash flow statment direct method do you basically make changes for evertthing in income stmt and offset with just working capital? And for Indirect, do we subtract interest expense/tax expse or since we are starting from net income, do we not worry about it and just adjust for changes in working capital? These always confuse me and i need to get them right for the test
Direct Method starts with CF in and then do add/subtract. Indirect method starts with Net Income and considers Depreciation/Amortization.
Direct method starts with sales, and then does add/subtract only items that affect cash (including accrual adjustments) Indirect starts with NI Add NonCash additions to liabilities or reduction in assets; Subtract Noncash additions to assets or reduction in liabilities; Adjust for accrual adjustments