Which of the following mathematical expressions calculates the net cash flow if depreciation is the only noncash item in a firm's income statement?
A)Net cash flow = Net income + Depreciation
B)Net cash flow = Accounting profit - Depreciation
C)Net cash flow = Accounting profit - Operating cash flow
D)Net cash flow = Fixed assets + Depreciation
E)Net cash flow = Operating cash flow - Depreciation

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense that reduces net income on the income statement. To calculate net cash flow when depreciation is the only noncash item, you add back the depreciation to net income because it did not actually reduce the cash balance.

Which of the Following Mathematical Expressions Calculates the Net Cash