The direct method of calculating our cash flow from operating activities starts from the income statement and:

a) Rebuilds it on the cash basis. So rather than looking at how much we billed in sales, we look at how much cash we recieved.

b) Look at how much we billed and adjust our accounts receivable balance accordingly.

c) Be concerned about the change in the accounts receivable and accounts payable balances rebuilding them to a cash basis.