Deprecation in statement cash flow?

[white1863]

Can anyone tell me if deprecation is in the statement of cash flow? Sometimes I see it in operating actives, but since no cash moves in or out, it would seem to be out of place.

thanks

 

[bmars]

In the Indirect Method, depreciation needs to be added back to NI to get to CFO b/c Dep Exp is not a cash expense

 

[killamanjaro]

Depreciation itself is not a cashflow. It decreases net income.

 

[acumenjay1]

To add on to bmars. If you see it when calculating the indirect method you have to add it back in bt if you see it when calculating the direct method than you ignore it.

You most likely will see it since any questions on this will probably include a summarized income statment and balance sheet and it will be up to you to decide what is included in the calculation an what is not.

 

[white1863]

thanks,

bmars, killamanjaro and acumenjay1. Now I understand

 

[namruts]

Here's a trick CFA question: Does depreciation affect cash flow?

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Depreciation reduces taxes, and therefore affects cash flow.

 

[bchadwick]

Oooh, you're right, but I woulda gotten that rong.

 

[white1863]

same here, thanks namruts

 

[CFAHouston]

Boys and girls,

Do not merely memorize these kind of question that namruts posted. You will see them, but will not successfully answer them from memorization only.