Evaluating stocks involves considering many crucial factors, but the ability to generate cash is of uniquely paramount importance. At the end of the day, a business centers around the idea of generating cash over net income. Non-cash expenses like depreciation and amortization can make these two figures look very different.
Non-cash expenses affect net income but not cash flow. However, non-cash expenses are still important to consider, given that they have legitimate effects on business operations.
