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Answer 1

Answer:

Depreciation shifts the expense of an asset for depreciation expense amid the asset's life. The records associated with account depreciation are termed as accumulated depreciation and depreciation expense. However cash is not included here. As such, depreciation decreases net income on the income statement, yet it does not diminish the cash account on the balance sheet. Since we start setting up the statement of cash flows utilizing the net income estimate which is derived from the income statement, it is required to alter the net income estimate with the goal that it is not diminished by depreciation expense. Hence, we add back the amount of the depreciation expense. Irrespective of including or adding back the after-tax interest expense relies upon the place from which it is started. The explanation is that free cash flow is accessible to the owners and creditors, accordingly it must be determined on before interest premise.

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