How depreciation is treated to the net profit before tax in calculating cash flow from operating activities while preparing cash flow statement of the company?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Added.
Depreciation is added to the net profit before tax in calculating cash flow from operating activities while preparing cash flow statement of the company
Depreciation is a non-cash item and hence it does not result in any cash flow. Therefore, this amount must be added back to the net profit while calculating cash flow from operating activity.