Using an Accelerated Depreciation Method Will Cause a Profitable Company

question 175

Multiple Choice

Using an accelerated depreciation method will cause a profitable company to incur:

• A)less taxes in early years of the asset's use as compared to later years.
• B)more taxes in early years of the asset's use as compared to later years.
• C)the same amount of taxes in early years of the asset's use as in the later years.
• D)none of the above.

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Definitions:

Cash Flows

The net amount of cash and cash-equivalents moving into and out of a business.

Financial Leverage

The use of borrowed money (debt) to finance the acquisition of assets, with the expectation that the profits will be greater than the interest payable.

Tax Deductible

Refers to certain expenses that can be subtracted from income to reduce the total taxable income.

Capital Gains

Profit earned from the sale of assets like stocks or real estate, where the sale price exceeds the purchase price.