Question

In a general sense, "cash flow" can be said to equal

A) operating income less taxes
B) operating income after taxes minus depreciation
C) operating income less taxes plus depreciation
D) operating income before depreciation and taxes plus depreciation

Answer 1

Answer:

Option-(C) should be correct.

In general sense, cash flow can be said to equal:-Operating income less taxes plus depreciation.

Explanation:

This is because operating income is profit which a firm realizes from its business operations after making deductions of operating expenses such as taxes, wages, and cost of goods sold among others.

Depreciation is added back because it does not impact cash flow despite it reducing profit, it is referred to as a non-cash expense.

Cash flow involves inflow and outflow of cash and cash equivalents.

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