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What is Indirect method
Indirect method is what you would probably be familiar with. It requires a lot less information to produce it and hence can be argued to be easier method.
With indirect method, profit before taxation (or profit before interest and tax) is taken from income statement and adjusted for non-cash items (that is depreciation, provisions). It's also adjusted for loss or profit on disposal of assets. Other items which will be classified under financing or investing are also adjusted for. Lastly adjustments are made for changes during the period in inventories, trade and other receivables and payables. This requires looking at current and prior year's statement of financial position.
As you checked the Answer Key to Question 6 in the Mastery Check from this lesson you may have noted that each year's net cash flows are calculated by adding depreciation back to n
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The securing of the working capital needed for the support of raises in accounts receivable and inventory related with an organizations initial expansion time.
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