Question

For a firm that is profitable and is paying corporate taxes on its profits, an increase in which one of the following will increase the operating cash flow?

A) Employee salaries

B) Office rent

C) Building maintenance

D) Depreciation

E) Equipment rental

Answer 1

Option (D) is correct

Operating cash flows will be increased by increase in Depreciation.

All the non cash items are added to the net income to find the oprerating cash flow. Depreciation is a non cash expense. So, the more is the amount of non cash expense or depreciation, the more is operating cash flow.

Option A,B,C E are incorrect as employee salaries, office rent and equipment rental are cash related expenses and they decrease the operating cash flows.