When Preparing a Statement of Cash Flows Using the Indirect

question 10

Essay

When preparing a statement of cash flows using the indirect method, why is depreciation added back to net income within the operating activities section when using the indirect method?

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Definitions:

Shares Outstanding

The total number of shares of a company that have been issued and are currently owned by shareholders.

Market Value

The current price at which an asset or company can be bought or sold in the marketplace.

Net Present Value

The calculation used to determine the current value of a series of future cash flows, adjusted for time and interest.

Acquisition Cost

is the total cost incurred to acquire an asset, investment, or property, which includes the purchase price and all associated expenses.