how depreciation affects cash flow
If depreciation is an allowable expense for the purposes of calculating taxable income, then its presence reduces the amount of tax that a company must pay. Thus, depreciation affects cash flow by reducing the amount of cash a business must pay in income taxes.hen that fixed asset was originally purchased, there was a cash outflow to pay for the asset. Thus, the net positive affect on cash flow of depreciation is nullified by the underlying payment for a fixed asset.