Net annual cash flow can be estimated by
A) deducting credit sales from net income.
B) adding depreciation expense to net income.
C) deducting credit purchases from net income.
D) adding advertising expense to net income.

Question

Quizplus · Accepted Answer

Adding depreciation expense to net income is a way to estimate net annual cash flow because depreciation is a non-cash expense that needs to be added back to net income to accurately reflect the cash generated by the business. Deducting credit sales or purchases and adding advertising expense are not relevant to estimating net annual cash flow.

Net Annual Cash Flow Can Be Estimated by