Under the indirect method, why is depreciation added back to profit in the cash flow statement?
- A It is a non-cash expense that reduced profit without any cash outflow
- B It represents cash received
- C It is a financing activity
- 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.





