Describe How Adding Depreciation Expense to Net Income Can Approximate

question 30

Essay

Describe how adding depreciation expense to net income can approximate cash flow from operations. Does depreciation expense really reflect a cash flow?

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Definitions:

Budgeted Amount

The total amount of money that has been allocated for a specific purpose or period of time.

Return on Assets

A financial ratio that measures the profitability of a company in relation to its total assets.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue.

Sales

The activities involved in selling products or services, ultimately generating revenue for a business.