Cash Flow Statment Direct & Indirect

zoeeileen Settling In NicelyRegistered Posts: 19
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.



  • crispy
    crispy Trusted Regular SouthamptonRegistered Posts: 456

    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:
  • AdamR
    AdamR Experienced Mentor Registered Posts: 668
    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
  • zoeeileen
    zoeeileen Settling In Nicely Registered Posts: 19
    Thankyou both very much for your help Zoe:001_smile:
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