Which of the Following Statements Is Correct for a Firm

question 95

Multiple Choice

Which of the following statements is correct for a firm in which depreciation expense exceeds EBIT (Operating Income) ? The firm:

• A)will have a net loss.
• B)will have no income-tax liability.
• C)needs to lower its interest expense.
• D)can still have a positive net income.

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Definitions:

Minimize Profits

The strategy of reducing profits to a minimum, possibly for tax advantages, ethical reasons, or for future strategic positioning.

Maximize Them

The process of making the most or best of certain resources, outcomes, or situations to achieve the highest possible benefit or efficiency.

Principal-agent Relationships

A framework within economics that describes the dynamics when one entity (the principal) hires another (the agent) to perform a task on their behalf, often involving delegation of decision-making authority.

Observability

The degree to which the internal states of a system are accessible to its external observation, often used in context of controlling complex systems.