CAF-1 · Chapter 14 · Question 14 of 15
Under the indirect method, how is depreciation expense treated when calculating cash generated from operations?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It is added to profit before tax.
Explanation
Because depreciation is a non-cash expense that reduced profit before tax, it must be added back to profit before tax to arrive at the actual cash generated from operations.
More IAS 7 Statement of Cash Flows MCQs
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