Which of the Following Statements Is Correct for a Firm

question 20

Multiple Choice

Which of the following statements is correct for a firm in which depreciation expense exceeds EBIT? 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:

Accrued Interest

The interest that has been earned but not yet paid or received in cash.

Investment In Bonds

The act of purchasing debt securities issued by corporations or governments, aiming to earn interest income and potentially benefit from price appreciation.

Interest Payment Dates

Specific dates scheduled for paying the interest on a loan or debt.

Consolidated Statements

Consolidated statements are financial reports that combine the financial position, results of operations, and cash flows of a parent company and its subsidiaries, presenting it as one entity.