The direct method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

Direct Method

A way to present the cash flow statement where actual cash flows from operating activities are listed directly.

Net Cash Flows

The difference between cash inflows and outflows in a company over a specific period, indicating the net change in cash and cash equivalents.

Operating Activities

These are the day-to-day actions involved in running a business, which include generating revenue, incurring expenses, and producing the fundamental cash flows of the business.