Which Statement About Depreciation Is True

question 13

Multiple Choice

Which statement about depreciation is true?

• A) The more depreciation a firm reports, the higher its tax bill, other things held constant.
• B) Depreciation reduces a firm's cash balance, so an increase in depreciation would normally lead to a reduction in the firm's net cash flow.
• C) Net Cash Flow = Net Income + Depreciation and Amortization Charges.
• D) Depreciation and amortization are not cash charges, so neither of them has an effect on a firm's reported profits.

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Definitions:

Quantity Supplied

The amount of a good that sellers are willing and able to sell.

Trade Policies

Measures and agreements set by governments to control exports and imports with the aim to protect domestic industries, manage the balance of payments, and promote economic growth.

Standard Of Living

The level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class or a certain geographic area.

Loanable Funds

The money available for borrowing in the financial markets, determined by savings and demands for investment.