Amortization is added back like depreciation in net income while making cash flow statement from indirect method.
Amortization itself don't reduce the cash flow from business that is not part of cash flow statement because it is just the allocation of intangible asset cost to profit and loss statement and not actual cash inflow or outflow.
depreciation is not part of cash flow statement and in indirect method for cash flow it will be added back to cash flow from operating activities.
Amortization of discount is added back to net income as there is no actual cash outflow due to amortization and that's why it is added back to cash flow from operating activities.
Amortization itself does not generate actual cash flow for a company; rather, it is an accounting method used to allocate the cost of an intangible asset over its useful life. While it reduces taxable income and may have tax implications, the cash flow impact occurs when the company initially pays for the asset, not during the amortization process. Therefore, while amortization affects financial statements and tax liabilities, it doesn't directly influence cash flow.
structure of cash flow statement as follows:1
Amortization itself don't reduce the cash flow from business that is not part of cash flow statement because it is just the allocation of intangible asset cost to profit and loss statement and not actual cash inflow or outflow.
Non cash items like depreciation and amortization should not be included in cash flow statement.
loan receivable is not part of cash flow statement as still no cash is received.
depreciation is not part of cash flow statement and in indirect method for cash flow it will be added back to cash flow from operating activities.
Amortization of discount is added back to net income as there is no actual cash outflow due to amortization and that's why it is added back to cash flow from operating activities.
Another name of cash flow statement is fund flow statement.
Cash flow statement is the statement which show the cash flow from operating, financing and investing activities.
Prime purpose of preparing cash flow statement is to tally the closing bank balance with opening bank balance so if there is a bank overdraft or negative bank balance it will automatically adjusted when complete cash flow statement is prepared. If after the preparation of cash flow, cash flow balance and bank balance don't tally it means there is some mistake in cash flow statment and it should be reviewed for any correcions.
Yes it is correct as cash flow statement only deals in cash so non cash items should be eliminated from cash flow statement.
structure of cash flow statement as follows:1
Free cash flow is the sum of operating and investing cash flows, which are reported on the cash flow statement.
EBITDA «ee-bit-dah» is an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization. The same calculation can be arrived at from "operating income before depreciation and amortization" (OIBDA). It is one measure of 'operating cash flow'. It differs from the cash flow from operations found in the Statement of Cash Flow primarily by ignoring payments for taxes or interest. EBITDA does not add back many of the other non-cash operating expenses, like the Statement of Cash Flow does. EBITDA also differs from free cash flow because of the difference above, and also because it does not recognize the cash requirements for replacing capital assets. Although there are different points of view regarding the use of this metric by equity owners, most agree to its validity when used by debtholders, or to evaluate a business's ability to handle debt.