@bthr remember when using the indirect method:
change in assets have an inverse relationship
change in liabilities have a direct relationship.
So, if an asset went down in in value year over year, you would add that back into net income.
if an asset went up you would subtract that from net income.
Think of it this way, did an expense resulting from the reduction of an asset have anything to do with cash going out the door? nope, thats why we add it back in when calculating the operating cash flows.
Similar, an asset going up means we either spent cash to to acquire something, or recognized something we received no cash for. thats why we take it back out when calculating the operating cash flows.
I hope this helps as I too am studying my assets (horrible pun) off here
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Ethics Exam - 90
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