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Why is depreciation added back in the cash flow statement?

  1. A It is a non-cash expense that reduced net income without any cash outflow
  2. B It represents cash received
  3. C It is a financing item
  4. D It reverses a tax charge
Answer

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

The indirect method starts from net income and reverses non-cash items and working capital movements to reach operating cash flow.

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