How Is Depreciation Accounted for on the Statement of Cash

question 45

Multiple Choice

How is depreciation accounted for on the Statement of Cash Flows?

• A) Depreciation is irrelevant for cash flow purposes and has no place on the Statement of Cash Flows.
• B) Depreciation expense is included in the operating activities section of the statement.
• C) As depreciation is deducted to determine Net Income there is no need to include it on the statement.
• D) None of the above

---

Definitions:

Liabilities Plus Equity

Liabilities plus equity represents the total value of a company's financial obligations plus its owners' investments, crucial for understanding its financial health.

Net Income

A company's overall earnings following the deduction of all expenses and taxes from its total revenue.

Du Pont Identity

A framework that breaks down the return on equity (ROE) into three parts: profit margin, asset turnover, and financial leverage, to diagnose financial performance.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets financed by its shareholders' equity.