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Cash Flow Analysis and Amortization

Why are depreciation charges relevant to a cash flow analysis? What about amortization?

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DEPRECIATION:
Deprecation means decline in value of an asset. (Management Accounting by Khan & Jain)
There can be several reasons of decline in value of asset:

Physical deterioration
It means "Wear and tear". It will lead to fall in value of assets.

Technological or Economic Obsolescence

Technological advances can cause an asset to become out of date and less desirable. There can be economic obsolescence due to changes in demand ...

Solution Summary

This solution of 286 words looks at how depreciation charges is relevant to a cash flow analysis. It also defines and discusses amortization in terms of depreciation charges.

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