How is annual cash inflow determined?
A) Depreciation is subtracted from net income because it is an expense.
B) Depreciation is added back to net income because it is not an outflow of cash.
C) Depreciation is subtracted from net income because it is an outflow of cash.
D) Depreciation is added back to net income because it is an inflow of cash.

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense that reduces net income but does not involve an outflow of cash. Therefore, it is added back to net income to arrive at the annual cash inflow.

How Is Annual Cash Inflow Determined