Under the indirect method of determining net cash flow from operating activities, how are investing and financing incomes treated?

Deducted from net profit

Under the indirect method of determining net cash flow from operating activities, investing and financing incomes are deducted from the net profit figure. This is because these items are not directly related to the operating activities of the business and are considered cash inflows from investing or financing activities. Investing incomes, such as interest received from investments, represent cash inflows that are not part of the core operating activities. Similarly, financing incomes, like dividend income received from investments in other companies, also do not reflect the primary operations of the business. By deducting these investing and financing incomes from the net profit, the calculation aims to adjust the net profit to reflect the cash flows that are generated from the core operating activities of the business. This helps provide a more accurate representation of the cash generated or used by the primary operations of the company, which is the main purpose of determining the net cash flow from operating activities.