Which of the Following Statements Best Describes Depreciation

question 41

Multiple Choice

Which of the following statements best describes depreciation?

• 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 of them has an effect on a firm's reported profits.

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Definitions:

Traits

Characteristic features or qualities distinguishing a person or thing, often inherited in the context of genetics.

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In psychoanalytic theory, a persistent focus of the id’s pleasure-seeking energies at an earlier stage of psychosexual development.

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The aspects of an individual's personality that involve creativity, imagination, and the ability to generate new ideas.

Objective Tests

Tests whose items must be answered in a specified, limited manner; tests whose items have concrete answers that are considered correct.