Question:

If depreciation is a non-cash expense, why does it affect the cash balance on the Cash Flow Statement?

Answer hidden.

Answer:

Even though depreciation is a non-cash expense, it affects the cash balance on the Cash Flow Statement because it is tax-deductible. Taxes are a cash expense, so depreciation affects cash by reducing the amount of taxes you have to pay in a given period.

This reduction in taxable income from the depreciation expense is also referred to as a "tax shield."

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Question:

If depreciation is a non-cash expense, why does it affect the cash balance on the Cash Flow Statement?

Answer:

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Question:

If depreciation is a non-cash expense, why does it affect the cash balance on the Cash Flow Statement?

Answer:

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