unfortunately, many people misunderstand the nature of the calculation deriving operating cash flow from net income. they have the misconception that depreciation is a source of cash. their misunderstanding is compounded by the failure of some companies to label the add-back of depreciation as an adjustment needed to convert next net income to cash generated by operations. instead, these companies simply list both net income and depreciation under the heading, "cash flow from operations." this confusion is exemplified by statements in the business press such as the following: