What is considered NOT a cash flow?

Depreciation expenses are considered a non-cash flow item because they represent the allocation of the cost of tangible assets over their useful lives rather than an actual cash transaction. Depreciation reduces the accounting income of a business but does not directly affect cash flow since no cash is exchanged at the time of recording depreciation.

In contrast, cash flow encompasses real cash transactions, such as cash received from clients or money going in and out of the company. These transactions directly impact the liquidity and financial health of a business. Thus, understanding cash flow is crucial for assessing a company’s operational efficiency and financial stability, while depreciation is important for accounting purposes but does not reflect immediate cash movement.