Which of the Following Statements Is CORRECT

question 70

Multiple Choice

Which of the following statements is CORRECT?

• A) Depreciation and amortization are not cash charges,so neither of them has an effect on a firm's reported profits.
• B) The more depreciation a firm reports,the higher its tax bill,other things held constant.
• C) People sometimes talk about the firm's net cash flow,which is shown as the lowest entry on the income statement,hence it is often called "the bottom line."
• D) 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.
• E) Net cash flow (NCF)is often defined as follows:
• Net Cash Flow = Net Income + Depreciation and Amortization Charges.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of the consumer increases, opposite to normal goods.

Quantity Demanded

The total amount of a good or service consumers are willing and able to purchase at a given price level.

Increase in Price

A situation where the cost of goods or services rises, potentially due to factors like higher demand, production costs, or inflation.

Supply and Demand

Supply and demand is an economic model that explains the interaction between the availability of a resource and the desire for that resource, affecting its price.