Which of the Following Is Not an Advantage of the Use

question 7

Multiple Choice

Which of the following is not an advantage of the use of accelerated depreciation methods for tax purposes as opposed to the straight-line method?

• A) Lower tax payments are made during the early years of the asset's life.
• B) The total amount of tax paid over the lifetime of the asset is reduced.
• C) The business has the interest-free use of deferred tax dollars until the later years of the asset's life.
• D) For many assets, the combination of decreasing depreciation expense of the asset and increasing repairs and maintenance expense tends to equalise the total periodic expense of holding the asset.

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Definitions:

Retention Ratio

The retention ratio is a financial metric indicating the percentage of a company's earnings that are not paid out as dividends but are reinvested back into the business.

Profit Margin

A financial metric that measures the percentage of revenue remaining after deducting all expenses, indicating the efficiency and profitability of a company's operations.

Sustainable Growth Rate

The maximum rate at which a company can grow its sales, earnings, and dividends without increasing debt or equity financing.

Debt Ratio

A financial ratio that measures the extent of a company's or individual's leverage, calculated by dividing total liabilities by total assets.