Assume a Firm Has Depreciation, Taxes, and Interest Expense

question 101

Multiple Choice

Assume a firm has depreciation, taxes, and interest expense. In this case, operating cash flow:

• A) Is the same as net income.
• B) Is the same as net income plus depreciation.
• C) Must be positive because depreciation is added to the taxable income.
• D) Can be positive, negative, or equal to zero.
• E) Is equal to the cash flow to creditors.

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Definitions:

Segment Reports

Financial reports that break down a company's operations, revenues, and expenses by distinct segments, such as geographical regions or product lines.

Common Fixed Costs

Expenses shared by multiple segments or products within a company that do not change with the level of production or sales.

Variable Manufacturing Overhead

Costs of manufacturing overhead that vary directly with the level of production, such as utilities used in the production process.

Product Costs

Costs directly associated with the production of goods, including materials, labor, and manufacturing overhead.