CashFlowNotesMORE - Page 1 of 3 EVEN MORE ABOUT THE...

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Page 1 of 3 EVEN MORE ABOUT THE CASHFLOW STATEMENT , ( In the Cashflow Statement why do we start with accrual Net Income the ) bottom line of the Income Statement and begin by adding back Depreciation Expense? Our general project in the Cashflow from Operation section is that we re trying to undo .” all the pure accruals , You could say that in the Cashflow Statement we're putting on a hat " ." that reads WE HATE ACCRUAL ACCOUNTING We want to all the " ," . pure accruals the ones that involve no actual Cash payouts or receipts ( ) The biggest and first culprit in that lineup of fake Expenses and ( ) Revenues from a Cashflow perspective is Depreciation Expense . . Depreciation Expense involves no Cash It s a phantom from a Cashflow ! , perspective The Cash went out when the resource was purchased not . now as we gradually expense it over its useful life Depreciation Expense ( ) is nothing more or less as we learned in Part 2 of the course than this - .” , gradual expensing of a long lived resource No Cash outflow here right? Another thing we do need to realize is that under Cash from Operations ( ) changes to Current Assets such as Accounts Receivable and Inventories
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CashFlowNotesMORE - Page 1 of 3 EVEN MORE ABOUT THE...

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