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Cash Flow from Operating Activities-Indirect Method

Why is deprec...

Question

Why is depreciation added back to net profit to find out operating profit?

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Solution

It is added back because it does not result in cash inflow or outflow.

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Q. Assertion :Depreciation amount is added back to net profit for calculating funds from operation in preparing a funds flow statement. Reason: Depreciation is an item of expense but not funds.

Q. Depreciation expenses are to net profit while calculating cash flow from operating activities.

Depreciation expenses are _________ to net profit while calculating cash flow from operating activities.

Q. Operating profit is calculated as:
Net profit + Non operating incomes - Non operating Expenses.

Q. __________________ are the items which are added to net profit while calculating funds from operation.

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