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

Question

Quizplus · Accepted Answer

Depreciation is a non-cash charge that reduces net income, but it has no impact on cash flow. Therefore, to accurately estimate the cash flow from operations, we must add back depreciation to net income.

To Estimate the Cash Flow from Operations, Depreciation Must Be