In Equity Analysis how can depreciation be seen as a source of funds?

Question

In Equity Analysis how can depreciation be seen as a source of funds?

Answer 1

Depreciation is called non cash expense meaning no cash is expensed when depreciation is realised. So it gets added back to the net income when cash flow is calculated and so is a source of fund in the Sources and Uses of Fund statement or Cash flow statement of American GAAP. Depreciation is realised for tax purposes.

Answer 2

Depreciation is also a non cash entry meaning it is expensed without any cash actually going out as expenses. This helps in lowering the tax burden of the company. So in the Cashflow statement which is prevelent in American GAAP accounting practices depreciation is considered as a Source of fund and is added back to the Net Income.

Answer 3

From what I remember depreciation will be deducted from original value so whatever it's value after depreciation will then be counted as an asset so that will be calculated as funds check out the inland revenue site or customs and excise

Answer 4

Only to the extent that depreciation is a non-cash expense that is deductible for tax purposes and decreases taxable income.