On the statement of cash flows of a healthy company, net cash from operating activities generally exceeds net income because of the add-back of depreciation.

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense that reduces net income, but is added back to net income on the cash flow statement because it does not affect the actual movement of cash. Therefore, net cash from operating activities, which reflects the actual cash generated from operations, is generally higher than net income.

On the Statement of Cash Flows of a Healthy Company