A business executive once stated, “Depreciation is one of our biggest sources of cash.” Do youagree that depreciation is a source of cash? Explain.
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A business executive once stated, “
agree that depreciation is a source of cash? Explain.
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- Charlie Parker, president of Spinners Company, has recently noted that depreciation increases cash provided by operations and therefore depreciation is a good source of funds. Do you agree? Discuss.Does depreciation decrease cash in a business? Explain your answer.Why is interest Expense and Depreciation added back, when calculating Free Cash Flow, if Free Cash Flow is suppose to represent the money that a business can give out to it's lenders and Owners, without the business being affected? Can you you provide an example?
- How can a Company Show Positive Net Income but go Bankrupt? What does Working Capital Mean? Why do Capital Expenditures Increase Assets When other Cash Outflows don't and Instead Create Expenses? Explain a Cash Flow Statement.True or false, the financing activities section of the statement of cash flows reflects the cash flows that affect current assets and liabilities? True or false, buying property, plant and equipment would be considered a cash outflow from financing? True or false, the financing section of the statement of cash flows reflects transactions in the equity accounts and the long-term liability accounts? True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an investor who was willing to sell them land worth $500,000 in exchange for stock in the company, would this transaction be shown in the investing activities section of the statement of cash flows?Which of the following statements are TRUE? a. The reason for including a treatment of depreciation in this book is to allow you to develop a reasonably accurate report to the owners of a business regarding its value at any given point in time. b. Depreciation spreads investment costs over the useful life of equipment purchased. c. Depreciation allowances can be treated as expenses because they are cash flows. d. Depreciation affects income taxes, which are cash flows.
- MANAGING YOUR WRITING Direct Method A friend of yours was looking at a schedule for the calculation of cash generated from operating activities prepared under the direct method and asked why depreciation expense is deducted from operating expenses. He is curious why depreciation is not considered an expense. Write a brief memo that explains why depreciation expense is deducted from operating expenses when preparing this schedule. Indirect Method A friend of yours was reading a statement of cash flows prepared under the indirect method and saw that depreciation expense was added when computing cash from operating activities. She is curious why depreciation is considered a source of cash. Write a brief memo that explains why depreciation expense is added to net income on the statement of cash flows and why it certainly is not a source of cash.. If a company reports positive net income for the year, can it also show a net cash outflow from operating activities? Explain.. Is depreciation a source of cash flow? explainWhat is the most important source of cash for many successful companies
- In comparison to investing and financing activities, it is often said that cash from operating activities must be the main source of cash to achieve long term success of the company. Do you agree or disagree with this statement? In your own words, give reason or reasons to support your answer taking into consideration the possible consequences of the cash being provided by any of the other two activities (financial and investing) over the long run.Which of the following is not a typical cash inflow in capital investment: a. cash savings on regular expenses. b. salvage value of old machine. c. proceeds from financing. d. reduction in working capital.1. Why does the company add back depreciation to compute net cash flows from operating activities? 2. Why are there changes in accounts receivable and inventories as adjustments to net earnings. Are accounts receivable and inventories balances increasing or decreasing during the year? 3. It is reported that the company invested $572 million in property, plant, and equipment. Is this an appropriate type of expenditure for the company to make? What relation should expenditures for PPE have with depreciation expense? 4. Stryker paid $300 million to repurchase its common stock in fiscal 2018 and, in addition, paid dividends of $703 million. Thus, it paid $1.003 million of cash to its stockholders during the year. How do we evaluate that use of cash relative to other possible uses for the company's cash? 5. Provide an overall assessment of the company's cash flows for fiscal 2018. In the analysis, consider the sources and uses of cash.
