To estimate the cash flow from operations,depreciation must be added back to net income because depreciation is a non-cash charge that has been deducted from revenue in the net income calculation.

Question

Quizplus · Accepted Answer

This is correct. Depreciation is a non-cash charge for the reduction in value of a fixed asset over time. It is subtracted from revenue when calculating net income, but it does not involve a cash outflow. Therefore, it must be added back to net income when calculating the cash flow from operations.

To Estimate the Cash Flow from Operations,depreciation Must Be Added