Answer: a. it is a non-cash expense, so it needs to be added back to net income when using the indirect method.
Explanation: Depreciation is the measurement of the decline in value of assets. When using the indirect method, since net income is a starting point in measuring cash flows from operating activities, depreciation expenses must be added back to net income. Depreciation is a source of cash inflow because it is a tax-deductible non-cash expense as a result it provides a tax reduction benefit which increases cash flow.
