Which of the following adjustments should NOT be made when computing free cash flow from incremental earnings?
A) adding depreciation
B) adding all non-cash expenses
C) subtracting increases in Net Working Capital
D) subtracting depreciation expenses from taxable earnings

Question

Quizplus · Accepted Answer

Depreciation expenses should be added, not subtracted, when computing free cash flow from incremental earnings as it is a non-cash expense and does not affect cash flow. Subtracting depreciation expenses from taxable earnings would lead to an incorrect calculation of free cash flow. Therefore, Option D is the incorrect adjustment.

Which of the Following Adjustments Should NOT Be Made When