Assume That Congress Recently Passed a Provision That Will Enable

question 94

Multiple Choice

Assume that Congress recently passed a provision that will enable Bev's Beverages Inc.(BBI) to double its depreciation expense for the upcoming year but will have no effect on its sales revenue or the tax rate.Prior to the new provision,BBI's net income was forecasted to be $4 million.Which of the following best describes the impact of the new provision on BBI's financial statements versus the statements without the provision? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

• A) The provision will reduce the company's cash flow.
• B) The provision will increase the company's tax payments.
• C) The provision will increase the firm's operating income (EBIT).
• D) The provision will increase the company's net income.
• E) Net fixed assets on the balance sheet will decrease.

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Definitions:

Seasonal Indexes

Factors used to adjust data for regular seasonal variations to better compare data across different times of the year.

Seasonalized Forecast

A prediction model that accounts for fluctuations or patterns that repeat over a specific period, such as seasons, adjusting for their impact on the data.

Seasonal Effect

A pattern observed in data that occurs at regular intervals throughout a year due to season-specific events or behaviors.

Trend and Seasonality

Components of time series data analysis, where trend refers to the long-term movement, and seasonality refers to patterns within a fixed period.