Cash flow from operating activities (CFO) indicates the amount of money a company brings in from its ongoing, regular business activities, such as manufacturing and selling goods or providing a service to customers. It is the first section depicted on a company’s cash flow statement.
There are two methods for depicting cash from operating activities on a cash flow statement: the indirect method and the direct method.
-The indirect method begins with net income from the income statement then adds back noncash items to arrive at a cash basis figure.
-The direct method tracks all transactions in a period on a cash basis and uses actual cash inflows and outflows on the cash flow statement.
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