Final answer:
The method of calculating cash flow from operations that requires the adjustment of net income for deferrals, accruals, non-cash, and non-operating expenses is the indirect method.
Step-by-step explanation:
The method of calculating cash flow from operations that requires the adjustment of net income for deferrals, accruals, non-cash, and non-operating expenses is the indirect method.
This method starts with net income from the income statement and then adjusts for non-cash expenses such as depreciation and amortization, non-operating expenses such as interest expense, and changes in working capital due to deferrals and accruals.
For example, if a company reported net income of $100,000 but had $20,000 in depreciation expense and $10,000 in interest expense, the indirect method would add back the $20,000 and $10,000 to calculate the cash flow from operations as $130,000.