When using EBITDA instead of net income to measure a firm's operational characteristics, why are depreciation and amortization expense added back? O A. Depreciation and amortization expense are superficial. B. Depreciation and amortization expense represent expenses from an accounting standpoint but don't represent actual cash outflows. C. Depreciation and amortization expense are random numbers and can be ignored. D. Depreciation and amortization.

When using EBITDA instead of net income to measure a firm's operational characteristics, why are depreciation and amortization expense added back? O A. Depreciation and amortization expense are superficial. B. Depreciation and amortization expense represent expenses from an accounting standpoint but don't represent actual cash outflows. C. Depreciation and amortization expense are random numbers and can be ignored. D. Depreciation and amortization.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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In which ways is the balance sheet impacted when by creating and depreciating assets? A) Assets decrease as the cash balance decreases when cash is spent on Capex B) Assets increase when capex is added to the fixed asset balance C) Equity decreases through retained earnings balance as depreciation is expensed in the P&L D) Assets decrease when the fixed asset balance as depreciation reduces the balance O A only O B only O Conly OD only O A, B, and D only OB and D only O All of the above
Which statement is incorrect? a. Under the transactions approach, net income is computed as the excess of income over expenses b. Under the capital maintenance approach, net income is computed as the excess of ending capital over beginning capital, excluding the effect of investments and withdrawals by owners. c. Unusual and infrequent items of expenses should be presented in in the income statement as a component of income from continuing operation. d. The single statement of comprehensive income shows a detailed presentation of all income and expenses, regardless of whether these income and expenses are recognized or not in the profit or loss. e. None of the above Statement 1: In the statement of changes in equity, the effect of the correction of a prior period error is presented separately for each component of equity. Statement 2: Preference share dividend appear under the retained earnings section of the statement of changes in equity. a. True, True b. False,…
Which of the following situations required us to make an downward adjustment to net income (subtracting) when computing operating cash flows? (check all that apply) A. there was a depreciation expense B. some property was sold for a gain on the net book value C. some recognized expenses were for COGS to suppliers paid for on account D. there were some recognized revenues in accounts receivable
Question A Explain how a company can report a positive net income and yet still have a negative net operating cash flow. Question B What is the m
Which of the following is not true about the information provided in the income statement? OIt helps in evaluating the past performance of the enterprise. O It provides a basis for predicting future performance. It helps assess the risk or uncertainty of generating future cash flows. O It helps in evaluating working capital.
assets that are purchased for use in operations but are not intended to be resold are called a. fixed assets b. income statement c. marketing costs d. proper cash flow
Cash flow from operating activities is increased by: a. depreciation and amortization b. a decrease in accounts receivable c. a decrease in inventory d. an increase in accounts payable e. all of these
What effect will the cash payment of an account payable have on the Balance Sheet? Group of answer choices Decrease an asset and decrease stockholders’ equity Decrease an asset and decrease a liability Increase an asset and increase a liability Increase one asset and decrease another asset
The payback period method is inferior to the net present value method because it ________. is difficult to compute Deals with accounting income rather than cash flows Fails to consider cash flows beyond the payback period
In the Statement of Cash Flows, depreciation is ignored because it is a non cash expense. Group of answer choices True False
When using EBITDA instead of net income to measure a firm’s operational characteristics, why are depreciation and amortization expense added back? Depreciation and amortization expense represent expenses from an accounting standpoint but don’t represent actual cash outflows. Depreciation and amortization expense represent an insignificant cash outflow for a business. Depreciation and amortization expense are superficial. Depreciation and amortization expense are random numbers and can be ignored.
The primary purpose of showing special types of eventsseparately in the income statement is to:a. Increase earnings per share.b. Assist users of the income statement in evaluating theprofitability of normal, ongoing operations. c. Minimize the income taxes paid on the results of ongo-ing operations. d. Prevent unusual losses from recurring.

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