Depreciation and amortization expense are added back to net income because they represent the recognition of a cash expense.

Question

Quizplus · Accepted Answer

Depreciation and amortization expense do not represent the recognition of a cash expense, but rather the allocation of the cost of assets over their useful lives. Therefore, they are non-cash expenses and are added back to net income in order to calculate cash flows.

Depreciation and Amortization Expense Are Added Back to Net Income