Which of the Following Statements Is FALSE

question 67

Multiple Choice

Which of the following statements is FALSE?

• A) Because only the tax consequences of depreciation are relevant for free cash flow, we should use the depreciation expense that the firm will use for tax purposed in our free cash flow forecasts.
• B) A firm generally identifies its marginal tax rate by determining the tax bracket that it falls into based on its overall level of pre-tax income.
• C) Free Cash Flow = (Revenues - Costs) × (1 - τ_c) - Capital Expenditures - ΔNWC + τ_c × Depreciation.
• D) Net working capital is the difference between current liabilities and current assets.

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Definitions:

Owner's Capital Account

A line item in a firm's balance sheet that shows the value of the proprietor's invested capital and the accumulated profits retained within the company.

Credited

An accounting entry that increases a liability or equity account, or decreases an asset or expense account.

Permanent Accounts

Accounts in the general ledger that are not closed at the end of the accounting period, including asset, liability, and equity accounts.

Closing Entries

Journal entries made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts.