That is a cash flow, So, it does show up on the cash flow statement. But then, they sold some of that inventory for cash. They bought some inventory on credit, So, that's not a cash flow so that's not on our list here. It's a negative number because that one is an outflow whereas the first one was an inflow. Well, that's going to be an investing activity. Next, the company used some of that money to buy plant. Well, that clearly is a financing activity. So, the first one was the company issued shares and got $60,000. And so that's what we're going to do next. The next step is to go into each one and simply classify it as operating, investing, or financing.
So, if we go back to our company, these are the transactions that involved cash, and we've listed how much cash was involved in each of the particular activities. So, the key thing under the direct method is, to first of all go back through all the transactions that occurred during the year and figure out which ones involved cash. And while this isn't very common in real world financial statements, it'll provide a good introduction to the indirect method which we'll be doing in a future video. We're going to look at the direct method for presenting the cash flow statement. In particular, we're going to focus on the construction of the cash flow statement. In this video, we're going to continue to follow our startup company through its initial set of financial statements.
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