Depreciation1. IntroductionGiven that cash flow is the life-blood of a firm, accuratedetermination of cash flows enables firms to make importantfinancial decisions that relate to whether the firm survives orgoes bankrupt. As a measure of a firm’s profitability and finan-cial health, cash flows could provide potential clues aboutthe source company’s ability to pay divided and thus attractinvestors’ interest too. There are three categories of cashflows recorded in statement of cash flow, i.e. cash flows fromoperation, financing and investment, of which operating cashflow, reflecting the ability of the firm to engage in day-to-day operations and its continuity in business, is of the mostimportance. For the managers of firms, investors or analysts,∗