The Advantages of Preparing a Cash Flow Statement Using the Direct Method. The statement of cash flows is one of the financial statements investors rely on to gauge a company's financial strength.

Under generally accepted accounting principles, the cash flow statement can be prepared using one of two practices: the direct method or the indirect method.

Direct vs. indirect methods of preparing a cash flow statement: The direct method focuses on going through individual transactions and compiling income and expenses.

The cash flows, in and out, resulting from financing and investing activities are listed in the same way whether the direct or indirect method of presentation is employed.

Cash flow statements are used to monitor the incoming and outgoing cash and cash equivalents of a company. See a cash flow statement example.

Explore the fundamentals of cash flow statements, including their structure, significance, and the insights they provide into a company's financial health in 2025.

Compare India's Accounting Standard 3 (AS 3) and Ind AS 7 on cash flow statements. Learn about their objectives, classification methods, and key differences in reporting ...

The direct method uses gross cash receipts and gross cash payments to prepare cash flow statements. This includes money paid to suppliers, receipts from customers, interest and dividends received, ...

By reviewing cash flow statements regularly, business owners can better manage finances, anticipate cash shortages and make informed decisions for growth. We’ll explain more about cash flow statements ...

Free cash flow and EBITDA are two ways of looking at the earnings of a business. Which to choose depends on what your goal is—comparison or valuation.