When calculating cash flow from operations,one should:
A) subtract depreciation since it represents the cost of replacing worn-out equipment.
B) deduct the depreciation tax shield from after-tax profit.
C) use after-tax profit and ignore depreciation.
D) add depreciation to after-tax profit.

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense, so it is added back to after-tax profit to calculate cash flow from operations.

When Calculating Cash Flow from Operations,one Should