Depreciation Is Usually Not Considered an Operating Cash Flow in Capital

question 104

Multiple Choice

Depreciation is usually not considered an operating cash flow in capital budgeting because:

• A)depreciation usually does not result in an increase in working capital
• B)depreciation is usually a constant amount each year over the life of the capital investment
• C)deducting depreciation from operating cash flows would be counting the lump-sum amount twice
• D)depreciation usually has no effect on the disposal price of the machine

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Definitions:

Financial Information

Data related to the financial performance and financial position of a company, including income statements, balance sheets, and cash flow statements.

Net Profit Margin

The net profit margin is a financial ratio that shows the percentage of profit a company generates from its total revenue.

Average Total Assets

A measure used to calculate the mean value of a company's assets over a specific period, helpful in assessing the company’s asset utilization efficiency.

Return on Assets

An indicator of how profitable a company is relative to its total assets, measuring the efficiency in using assets to generate earnings.