Cash flow from operating activities is an important benchmark for determining the financial success of the company’s core business.
Cash flows from operating activities is the first section of the statement of cash flows, which also includes cash from investing and financing activities.
There are two methods of showing cash from operating activities in the cash flow statement: the indirect method and the direct method.
The indirect method starts with net income from the income statement and then adds non-monetary items to get a cash-based figure.
The direct method tracks all transactions for the period on a cash basis and uses the actual cash inflows and outflows in the cash flow statement.