Internally generated cash is calculated as:
i.retained earnings; II)interest payments; III)depreciation
A)(I - II)
B)(I + II)
C)(I + III)
D)(I - III)

Question

Quizplus · Accepted Answer

Internally generated cash can come from two sources: profits retained in the business (which are represented by retained earnings) and non-cash expenses such as depreciation. Therefore, the correct formula for internally generated cash is I + III. Interest payments are not a source of internally generated cash, so option A and B can be ruled out. Option D is also incorrect since depreciation is a source of internally generated cash, not a deduction from it.

Internally Generated Cash Is Calculated As