As Seen on an Income Statement

question 27

Multiple Choice

As seen on an income statement:

• A)interest is deducted from income and increases the total taxes incurred.
• B)depreciation reduces both the pretax income and the net income.
• C)depreciation is shown as an expense but does not affect the taxes payable.
• D)the tax rate is applied to the earnings before interest and taxes when the firm has both depreciation and interest expenses.
• E)interest expense is added to earnings before interest and taxes to get pretax income.

---

Definitions:

Standard Normal

Refers to a normal distribution with a mean of 0 and a standard deviation of 1, used as a basis for comparing and standardizing normal distributions.

Random Variable

A variable whose outcomes depend on the results of a random phenomenon.

Normally Distributed

Refers to a data distribution that follows a bell-shaped curve, characterized by data clustering around a mean or central value.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values; a low standard deviation indicates that the values tend to be close to the mean, while a high standard deviation indicates that the values are spread out over a wider range.