Don’t we have to add back interest expenses and taxes to Net income while computing the indirect method of CFO? And we need to add depreciation expenses right? Please explain.
No, no interest expense and no taxes. These are income statement positions.
Interest and taxes are CFO so they should already be in net income. Depr needs to be added back.
finfan, check this , might help: http://www.analystforum.com/phorums/read.php?11,732236,732304#msg-732304
No! Why would you add back taxes and interest. Those are cash expenses. You would only add back non-cash interest and tax, but the CFA materials never go to that level. You also need to add increases to working capital liabilities and subtract additions to working capital assets
very clear explanations… thanks everyone…