Why is depreciation expense (from the income statement) adde…
Why is depreciation expense (from the income statement) added back to the cash flow statement. Do not just say it’s because depreciation is a non-cash expense. Use the following data to answer this question: The firm purchases an asset that cost $1,000,000 and has a 10-year depreciable life. Talk about the timing of the cash outlay (that is when this happens) and the timing of when this cost is “expensed” on the Income statement. Then using this “data” explain why depreciation expense is added back to get cash flow.