The direct method of reporting cash flows from operating activities provides clearer information about the sources and uses of cash than does the indirect method.

Question

Quizplus · Accepted Answer

The direct method of reporting cash flows from operating activities provides a more detailed breakdown of cash receipts and payments than the indirect method, which uses adjustments to net income to calculate operating cash flows. Therefore, the direct method is considered to provide clearer information about the sources and uses of cash.

The Direct Method of Reporting Cash Flows from Operating Activities