Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the indirect method.

Indirect Method

A financial accounting technique used to prepare the cash flow statement, where changes in balance sheet items are adjusted to convert accrual-based net income into cash flow.

Operating Activities

Encompasses the revenue-generating activities of a business, including production, sales, and delivery of the company's product, as well as day-to-day operations.

Statement Of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, dividing cash flows related to operating, investing, and financing activities.