What is the difference between Direct and indirect cash flow statements, specially for purpose of use?

the direct method is proper for users not have finance background ,but the indirect one is proper for users have finance background

For direct cash flow method company might not keep the information in the required form. example, companies using accrual accounting lump together cash and credit sales -- they would have to make special provision to track cash sales separately.

 

For  indirect method  most companies find it easier to employ. Management and shareholders might fret if a company consistently reports net income exceeding cash flows -- they will want to identify the sources of non-cash income and determine whether these are masking serious problems with the business

The indirect method uses readily available information and most companies find it easier to employ. Management and shareholders might fret if a company consistently reports net income exceeding cash flows -- they will want to identify the sources of non-cash income and determine whether these are masking serious problems with the business. If you believe that “cash is king,” you will look to the cash flow statement to measure the company’s liquidity -- the ability to pay bills and avoid defaulting on debt. Cash shortages can lead to bankruptcy, whereas excess cash might indicate a need to take steps such as increasing investments, paying down debt, increasing executive salaries or distributing dividends.

 

Companies prefer indirect method because it shows the non cash items like amortization , depreciation , loss and gain from salling fixed assets which interpretes revenue exeeds cash flow ,owners want to know if there are masking problems with business . Other defference between tow methods is in direct method that we wouldn't have make special provision to track cash sales separately because companies using accrual accounting lump togather cash and cridet sales.