Why Is Depreciation Added to Net Income to Determine Cash

question 27

Multiple Choice

Why is depreciation added to net income to determine cash flow from operations?

• A)to compensate for financial risk
• B)because depreciation is an expense but does not represent a cash flow
• C)It is standard procedure when capital budgeting for a multinational corporation.
• D)Net income is understated due to excessive depreciation.

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Definitions:

Cornea

The transparent front part of the eye that covers the iris, pupil, and anterior chamber, responsible for focusing most of the light that enters the eye.

Purity

The condition or quality of being free from contamination, pollutants, or immoral behavior; often associated with cleanliness or moral wholesomeness.

Wavelength

A measure of the distance between consecutive points of a wave, typically used in the context of electromagnetic waves.

Night

The period of darkness in each twenty-four hours; the time from sunset to sunrise.