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Non-cash charges

Expenses that reduce reported profit without any money leaving the business, added back at the top of the cash flow statement.

The standard list is depreciation-accounting, amortisation, stock-based pay, impairment and deferred tax movements. Adding them back is mechanically correct, but treating them all as economically free is not: shares issued to staff dilute owners as surely as cash would have.

Depreciation is non-cash today because the cash went out earlier as capex. That is why subtracting capex to reach free-cash-flow restores the honesty that the add-back removes.

Example: Northwind Tools adds back $107M: $64M depreciation, $11M amortisation and $32M of stock-based pay. Only the first two correspond to cash already spent on assets still in use.

Related: operating-cash-flow, amortisation, sbc-as-percent-of-revenue, adjusted-ebitda

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