Preparing a cash flow statement using the indirect method involves adjusting net income for changes in balance sheet accounts to calculate cash generated from operating activities. This method starts with net income from the income statement and adds back non-cash expenses, such as depreciation and amortization. It also adjusts for changes in working capital accounts, such as accounts receivable, inventory, and accounts payable. The indirect method provides insights into how net income is converted into cash flow, helping stakeholders understand the financial health and liquidity of a business.