The cash flow approach involves a calculation with a number of steps, starting with the pre- interest profits. Which of the following steps would you take first?
A) Take away capital expenditure on fixed assets
B) Take away interest payments
C) Discount back to the present
D) Add depreciation

Question

Quizplus · Accepted Answer

Depreciation is added back to pre-interest profits as the first step in the cash flow approach because it is a non-cash expense that has already been deducted from the profit.

The Cash Flow Approach Involves a Calculation with a Number