- CFA Exams
- 2025 Level I
- Topic 4. Financial Statement Analysis
- Learning Module 4. Analyzing Statements of Cash Flows I
- Subject 5. Conversion from the Indirect to the Direct Method
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Subject 5. Conversion from the Indirect to the Direct Method PDF Download
Although the indirect method is most commonly used by companies, the analyst can generally convert it to the direct format by following a simple three-step process.
- Aggregate all revenue and all expenses.
- Remove all non-cash items from aggregated revenues and expenses and break out remaining items into relevant cash flow items.
- Convert accrual amounts to cash flow amounts by adjusting for working capital changes.
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
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