Question

Which component of net income does not affect cash flow?

A) Depreciation on plant assets
B) Payment of cash dividends
C) Issuance of notes payable
D) Purchase of inventory

Answer 1

Depreciation on plant assets is the component of net income that does not affect cash flow. The correct answer is A)

Step-by-step explanation:

The component of net income that does not affect cash flow is A) Depreciation on plant assets. Depreciation is a non-cash expense that represents the gradual loss of value of an asset over time. It is deducted from net income to determine taxable income, but it does not involve an outflow of cash.