Which one of the following is the most common definition of cash flow as used in the price-cash flow ratio?
A)net income minus dividends
B)net income plus depreciation
C)net income minus depreciation plus taxes
D)earnings before interest and taxes plus depreciation
E)earnings before interest and taxes

Question

Quizplus · Accepted Answer

The most common definition of cash flow, especially in the context of the price-cash flow ratio, is net income plus depreciation. This is because depreciation is a non-cash expense that reduces net income on the income statement, but it does not affect the actual cash flow of a company. Adding it back to net income gives a better picture of the cash available to the company.

Which One of the Following Is the Most Common Definition