Cash Flow Statment Direct & Indirect

zoeeileenzoeeileen Settling In NicelyPosts: 19Registered
Hi All

Hope someone can help me.

I really am stuck on the direct/ and indirect method of the cash flow statement.

I really dont understand the logic of the INDIRECT METHOD mostly, .

For example increase in receivebles is a (-) drecrase in payables is a (-).

I really hope someone can help.

Thankyou very much hope some one can help.

Zoe:001_smile:

Comments

  • crispycrispy Trusted Regular SouthamptonPosts: 454Registered
    Hello,

    On the cash flow statement the figure for an increase in receivables will appear as a negative as this means you have collected less from your debtors over the period - therefore have less cash. Same logic for payables, if these have decreased you have paid more out to creditors - so again have less cash.

    The cash flow statement is broken down into operating, investing and financing activties. Once you have cracked it, you should find them pretty straight forward :001_smile:
  • AdamRAdamR Experienced Mentor Posts: 668Registered
    If you can't remember which way round the non cash items go, try creating words/phrases that will help. For example, I suggested to a fellow classmate that she remember that "I AM" = Increase in Assets (Receivables & Inventories) is a Minus.

    From this you can deduce that a Decrease in Assets is a Plus, and you just have to reverse things for liabilities - Increase in Liabilities is a Plus and Decrease in Liabilities is a Minus.

    If anybody found any other ways to remember them I'd be interested to hear them.

    Hope this helps
  • zoeeileenzoeeileen Settling In Nicely Posts: 19Registered
    Thankyou both very much for your help Zoe:001_smile:
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