An enterprise can report cash flows from operating activities using either of the following methods:
Direct methods: Major classes of gross cash receipts and gross cash payments are disclosed.
Indirect method: The profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and incomes or expenses associated with investing or financing cash flows.
Enterprises are encouraged to report cash flows from operating activities using the direct method. The direct method provides information that may be useful in estimating future cash flows and which is not available under the indirect method.
Cash flow from operating activities is a classification of cash flow. Learn the basics of Cash Flow Statement, its objectives, and classifications in this article: Cash Flow Statement (CFS)