In What Manner Does Depreciation Expense Affect Investment Projects

question 89

Multiple Choice

In what manner does depreciation expense affect investment projects?

• A) It reduces cash flows by the amount of the depreciation expense.
• B) It increases cash flows by the amount of the depreciation expense.
• C) It reduces taxable income by the amount of the depreciation expense.
• D) It reduces taxes by the amount of the depreciation expense.

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Definitions:

Retained Earnings

Retained earnings represent the cumulative amount of net income a company retains for reinvestment in its operations rather than paying it out as dividends.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing ownership interest.

Gross Margin Percentage

A financial metric that measures the proportion of money left over from revenues after accounting for the cost of goods sold, expressed as a percentage.

Gross Margin

The difference between revenue and the cost of goods sold, which indicates the profitability before administrative, sales, and other expenses.