Beginning with net income, the indirect method of reporting cash flows from operating activities works backward to determine cash from operating operations.
The net change in cash and cash equivalents entering and exiting a business is referred to as cash flow. Money received and spent, respectively, represent inflows and outflows. Fundamentally, a company's ability to maximize long-term free cash flow and generate positive cash flows defines its capability to add value for shareholders.
FCF is the cash that remains from a company's ordinary business operations after any capital expenditures (CapEx) have been paid for. The cash flow of an organization is the sum of money coming in and going out. For businesses, sales bring in money, but they also have expenses. Additionally, they might profit from investments, royalties, licensing contracts, and interest. They may also offer items on credit with the understanding that payment would come later.
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The complete question is given below :
Which method of reporting cash flows from operating activities begins with net income and works backward to derive cash from operating activities?
