If you examine the cash flow statements of most public companies, you'll notice that depreciation appears in the calculation of cash from operations (these would be companies that use the indirect method of calculating cash from operations). Does this mean that depreciation is a source of cash for a company? Explain.
Answer to relevant QuestionsWhy are losses added back to and gains subtracted from net income when cash from operations is calculated using the indirect method? Explain the difference between liquidity and solvency. Which is more important to an entity? Is it possible for an entity to be liquid but not solvent or solvent but not liquid? Explain.What are the two methods for calculating and reporting cash from operations? Explain how each arrives at cash from operations. As a user of financial statements, which method of calculating cash from operations would you ...Assuming inventory is paid for in cash, explain why an increase in accounts receivable means that cash collected during a period is less than the amount of revenue recognized.IFRS allows managers to choose how to classify interest paid in the cash flow statement. What are the alternative classifications allowed? What is the impact on the cash flow statement of these alternatives? What is the ...
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