Cash Flow – Cash Flow Notes

Pierre O:

Depreciation is not considered a cash flow.
However, depreciation is a tax deduction and tax is considered a tax flow.
Example:
Investment of 100,000 $ – depreciated over 5 years
Net Income of 25,000 $ per year
Tax rate at 30%
In year 1-10:
Net Income 25000
Depreciation 10000
Taxable income 15000 it is 25000-15000
Taxes due 4500 it is 30% of 15000
Cash Flow 20500 it is 25000-4500

Hope it makes sense…