Question

Statement - I: Snow Limited earned a profit of ₹ 2,00,000 after charging depreciation of ₹ 50,000 on machinery. So, operating profit before working capital changes would be ₹ 2,50,000.

Statement - II: Depreciation is added back to net profit as it does not result in any cash flow.

Choose the correct option from the following:

विकल्प

• Only Statement - I is true. 

• Only Statement - II is true.

• Both the Statements are false. 

• Both the Statements are true.

Answer 1

Both the Statements are true.

Explanation:

Depreciation is a non-cash expense as it does not involve any cash outflow. Therefore, it is added back to net profit under non-cash and non-operating expenses.