Asked by Antoine Miquel on Jun 16, 2024
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Depreciation is added back to net income to determine cash from operating activities under the indirect method.
Depreciation
The gradual reduction of the recorded cost of a fixed asset over its useful life.
Net Income
Net income is the total profit of a company after all expenses, including taxes and costs, have been subtracted from revenues.
Indirect Method
The indirect method is a way of calculating cash flows from operating activities for the cash flow statement by starting with net income and adjusting for changes in balance sheet accounts.
- Distinguish between direct and indirect approaches in reporting cash flows from operating activities.
- Comprehend the impact of depreciation on operational cash flows and its representation in cash flow statements.
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Learning Objectives
- Distinguish between direct and indirect approaches in reporting cash flows from operating activities.
- Comprehend the impact of depreciation on operational cash flows and its representation in cash flow statements.
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