DIRECT METHOD: CASH FLOW FROM OPERATING ACTIVITIES
1. Cash Received from Customers
= Sales + Decrease (or - Increase) in Accounts Receivable.
2. Cash Paid to Suppliers
= Cost of Goods Sold + Increase (or - Decrease) in Inventory + Decrease (or - Increase) in
Accounts Payable
3. Cash Paid for Operating Expenses (Includes Research and Development)
= Operating Expenses + Increase (or - decrease) in prepaid expenses + decrease (or increase) in accrued liabilities.
4. Cash Interest
= Interest Expense + decrease (or - increase) in interest payable + amortization of bond
premium (or - discount).
5. Cash Payments for Income Taxes
= Income Taxes + Decrease (or - increase) in Income Taxes Payable.
6. Income Tax Refund Paid
7. Other Cash received (paid)
The Total of these give the NET CASH FLOW FROM OPERATING ACTIVITIES.