The operating activities section of the cash flow statement uses net income and adjusts it by the change in noncash items, i.e. depreciation, amortization, and changes in working capital. Depreciation and amortization are the non cash items to be added back. Also, adjusted are changes in current assets and liabilities, i.e. changes in accounts receivables, inventory, or accounts payables. This method is widely used because it links net income (from the income statement) to actual cash flow, which provides more transparency about how operations impact cash positions of a company.

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