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Under the indirect method, why is depreciation added back to profit in the cash flow statement?

  1. A It is a non-cash expense that reduced profit without any cash outflow
  2. B It represents cash received
  3. C It is a financing activity
  4. D It is a tax adjustment
Answer

It is a non-cash expense that reduced profit without any cash outflow

The indirect method starts from profit and reverses non-cash items and working capital movements to arrive at operating cash flow.

All CA MCQs

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