Asked by Yahya Naqvi on Jul 08, 2024
Verified
Which statement about depreciation is true?
A) The more depreciation a firm reports, the higher its tax bill, other things held constant.
B) Depreciation reduces a firm's cash balance, so an increase in depreciation would normally lead to a reduction in the firm's net cash flow.
C) Net Cash Flow = Net Income + Depreciation and Amortization Charges.
D) Depreciation and amortization are not cash charges, so neither has an effect on a firm's reported profits.
Depreciation
This is the systematic allocation of the cost of a tangible asset over its useful life. It reflects the consumption of the asset over time.
Tax Bill
A tax bill is an official statement from a governmental authority specifying the amount of taxes owed by an individual or organization for a certain period.
Net Cash Flow
The amount of cash that is generated or lost by a business in a given period, after accounting for all cash inflows and outflows related to operational, investing, and financing activities.
- Learn the repercussions of depreciation strategies and tax laws on the composition of financial statements.
- Comprehend how depreciation and modifications in assets influence tax liabilities and the net cash flow.
Verified Answer
Learning Objectives
- Learn the repercussions of depreciation strategies and tax laws on the composition of financial statements.
- Comprehend how depreciation and modifications in assets influence tax liabilities and the net cash flow.
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