Reporting Cash Flows From Operating Activities

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 24, 2023

An enterprise can report cash flows from operating activities using either of the following methods:

  • Direct methods: Major classes of gross cash receipts and gross cash payments are disclosed.
  • Indirect method: The profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and incomes or expenses associated with investing or financing cash flows.

Enterprises are encouraged to report cash flows from operating activities using the direct method.

The direct method provides information that may be useful in estimating future cash flows and which is not available under the indirect method.

Cash flow from operating activities is a classification of cash flow.

Learn the basics of Cash Flow Statement, its objectives, and classifications in this article: Cash Flow Statement (CFS)

Reporting Cash Flows From Operating Activities FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.