This question aims to understand Cash Flow, when we invest our money in companies.

Let's say, if a company thinks: "We make so much money. Let's pay our people 66% more in salary." In that case, if everything else stays the same, will the Cash Flow of the company change?

And does it matter what definition of Cash Flow it is? One definition of Cash Flow I know of is, net income + depreciation, so in that case, since

net income = revenue - COGS - wages expenses - other expenses - tax

so it seems the Cash Flow will become lower. But does it apply to all definitions of Cash Flow?

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    Is there a particular reason you thought of this question? I am thinking there might be some underlying conclusion you are trying to form, and knowing what that is might help provide a deeper answer. Oct 1 at 13:17

Yes, cash flow will be reduced, assuming at least some of that salary is in cash (i.e. not all stock or options), since it is a cash outflow with no corresponding cash inflow to offset it.

But does it apply to all definitions of Cash Flow?

There's only one definition of "cash flow" (net cash in/out of the company) but different ways to calculate it. The easiest way is typically to start with ALL income/expense and back out everything that's NOT cash-based (adding back depreciation expense, amortization, stock compensation, etc.)

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