We Add Depreciation to Net Income to Arrive at a True

question 104

True/False

We add depreciation to net income to arrive at a true earnings picture.
Depreciation is re-added to net income to move closer to a "cash basis" earnings number, since it represents a "non-cash" expense.

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Definitions:

Market Yield

The return on investment for a security currently traded in the market, often referring to bonds and calculated by considering the annual interest payments and the market price.

Negative Bond Covenant

A condition in a bond agreement that forbids certain activities by the issuer, aimed at protecting the interests of the bondholders.

Dividend Payments

Distributions issued by a company to its stockholders, typically sourced from the firm's earnings.

Market Price

The latest trading price for an asset or service on the market.