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Under the Indirect Method, the Net Cash Flow from Operating

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Under the indirect method, the net cash flow from operating activities is computed by adjusting net income to remove the effect of all deferrals of past operating cash receipts and payments, and all accruals of future operating cash receipts or payments.


Definitions:

Machine-hours

A measure of production time, indicating the number of hours that machines are operational in the manufacturing process.

Direct Labor-hours

The total time worked by employees that can be directly associated with the production of specific goods or services.

Manufacturing Overhead

Manufacturing overhead encompasses all indirect costs associated with the manufacturing process, including utilities, maintenance, and equipment depreciation.

Fixed Manufacturing Overhead

Overhead costs in manufacturing that remain constant regardless of the volume of production, such as salaries of supervisors and factory rent.

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