Accounting / July 19, 2018 / Pearl Bailey
The cash flow statement is linked to the income statement by net profit or net burn. The profit or burn on the income statement then is used to calculate cash flow from operations. This is referred to as the indirect method. Another technique, called the direct method, can also be used to prepare the cash flow statement: In this case, the money received is subtracted from the money spent to calculate net cash flow.
Operating Income Deducting SG&A from a company's gross profit produces operating income. This figure represents a company's earnings from its normal operations before any so-called non-operating income andor costs such as interest expense, taxes and special items. Income at the operating level, which is viewed as more reliable, is often used by financial analysts rather than net income as a measure of profitability.
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