Which non-cash charge is added back to EBIT to approximate cash flow from operations?

Which non-cash charge is added back to EBIT to approximate cash flow from operations?

• A. Interest expense
• B. Taxes
• C. Depreciation and amortization
• D. Changes in working capital

Answer: (C)

Non-cash charges reduce accounting profits without using current cash, so when converting an operating profit measure into a cash-based figure you add them back. Depreciation and amortization are classic non-cash charges that lower EBIT but do not consume cash in the period, making them the appropriate add-back to approximate cash flow from operations. The other items are actual cash outflows or reflect working-capital timing, not non-cash charges, so they aren’t added back in this context.

Non-cash charges reduce accounting profits without using current cash, so when converting an operating profit measure into a cash-based figure you add them back. Depreciation and amortization are classic non-cash charges that lower EBIT but do not consume cash in the period, making them the appropriate add-back to approximate cash flow from operations. The other items are actual cash outflows or reflect working-capital timing, not non-cash charges, so they aren’t added back in this context.