The cash flow statement is a vital financial report that tracks how money moves in and out of a company. It’s one of the big three financial statements, sitting alongside the balance sheet and the income statement.
There are two main ways to prepare a cash flow statement: the direct method and the indirect method. This article will explain both methods, including what they are, how they work, and some of the pros and cons of each.
We’ll cover definitions, examples, and the advantages and disadvantages of each method. Finally, we’ll help you figure out which method is right for you. Let’s dive into the world of direct cash flow vs indirect cash flow.