Direct CFO Method - Schweser contradiction?

[Saturdaynitefeva]

Help! Can someone please clarify whether the direct CFO method takes into account changes in working capital such as decreases/increaes in inventory. According to Schweser Notes 3 p. 56 it does but according to Schweser Book 6 it does not! "Changes in inventory [and depreciation] are used with the indirect method." (p.131 #47)

 

[fotis21r]

I am pretty sure it does. I sometimes found my self thinking that schweser contradicts what it had said previously, but in the end its just the manner the wrote it in.

ie. Cash collection includes change in recievables which is a Current Asset account (capital account, also recall cash inputs includes the change in the inventory and accounts payable.

i hope this helps.

Both direct and indirect include changes in working capital accounts.

 

[Saturdaynitefeva]

thought so, thanks for confirming