March/June 2016 (past year paper)

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May 11, 2018 at 8:39 am #451179
wingyee
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Question 1b (i)

we use free cash flow to find the dividend capcity, and the depreciation should add back to the operating profit,right? But,why the answer did not add back the depreciation?
May 11, 2018 at 5:08 pm #451372
John Moffat
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It is because of note 2 of the question. Although the depreciation is not a cash flow, the same amount will be needed keep the present production capacity and this is a cash flow.
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