Which one of these statements related to depreciation is correct for a firmwith a taxable income of $121,600 and an after-tax income of $74,200?A. Depreciation increases the net book value of the firm's assets.B. Depreciation is a non-cash expense that increases the firm's cash flows.C. Depreciation lowers the firm's net income but does not affect its cashflows.D. Depreciation has no effect on either the firm's net income or its cashflows.E. Depreciation decreases both the firm's net income and its cash flows.

Correct Answer: B. Depreciation is a non-cash expense that increases the firm's cash flows.…

Answered: Which one of these statements related…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 12MCQ: Which of the following statements is true? a. The fixed asset turnover ratio assists managers in...

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Why is the depreciation tax shield a component of analyzing investment decisions? O A. Depreciation causes a cash outflow that is added to determine net income. O B. Though no cash was paid out, depreciation was included on the tax return, which caused the company to pay taxes on the amount of depreciation. O C. Depreciation lowers cash outflows for income taxes paid. O D. Depreciation creates cash flows that do not appear on the income statement.
Both depreciation and amortization are cash expenses that will serve to boost the firm’s after-tax cash flows. A) TRUE B) FALSE
Which of the following statements is true? a. The fixed asset turnover ratio assists managers in determining the estimated future capital expenditures that are needed. b. The average age of the fixed assets is computed by dividing accumulated depreciation by depreciation expense. c. If net sales increases, the fixed asset turnover ratio will decrease. d. A relatively low fixed asset turnover ratio signals that a company is efficiently using its assets.
13. Which of the following statements is true? a.The tangible capital asset turnover ratio assists managers in determining the estimated future capital expenditures that are needed. b.The average age of the tangible capital assets is computed by dividing accumulated depreciation by depreciation expense. c.If net sales increases, the tangible capital asset turnover ratio will decrease. d.A relatively low tangible capital asset turnover ratio signals that a company is efficiently using its assets.
Which of the following statements are true? Select one or more: a. MACRS must be used for book purposes if it is used for tax purposes. b. Managers often prefer the straight-line method because it helps to smooth earnings. c. Units of production method is not appropriate for natural resources. d. Double-declining balance recognizes more depreciation expense early in an asset's life. PreviousSave AnswersNext
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.....is the after tax cash flow generated by a business minus the cost of the capital it has deployed to generate that cash flow a. Net Present Value (NPV) a. Ob Economic value added (EVA) Oc. Internal Rate of Return (IRR) d. Discounted Cash Flow
What is depreciation and amortization? What's the difference? It is an accounting concept that has an indirect impact on cash flow as it is deductible for tax purposes and lowers the overall amount of taxes paid for that period. Therefore, it does impact or lower cash outflows for taxes. That is called the tax shield of depreciation and amortization. Over the course of my career, companies have increased their percentage of intangible property that must be amortized. Now, it is very common where companies will have little property, plant and equipment, but lots of intangible property. Why?
Following IFRS, which statement is false? Group of answer choices If the long-term operating asset's fair value increases in subsequent accounting periods, after an initial write-down, the firm reports the unrealized gain on the income statement, but only to the extent of previously recognized losses. The revaluation surplus account is reported as other comprehensive income on the statement of comprehensive income. If the revaluation initially decreases the long-term operating asset's carrying value, the firm reports the difference between the carrying value and fair value as an unrealized loss on the income statement. If the long-term operating asset's fair value increases in subsequent accounting periods, after an initial write-down, the firm reports the unrealized gain in the revaluation surplus account.
During a period of deflation, an entity would have the greatest gain in general purchasing power by holding: a. Cash b. Property, plant and equipment c. Finance lease liability d. Mortgage payable
When using EBITDA instead of net income to measure a firm's why are operational characteristics, depreciation and amortization expense added back? O A. Depreciation and amortization expense are superficial. OB. Depreciation and amortization expense represent expenses from an accounting standpoint but don't represent actual cash outflows. O C. Depreciation and amortization expense are random numbers and can be ignored. D. Depreciation and amortization expense represent an insignificant cash outflow for a business.
Which of the following is NOT correct regarding the rate of return on assets? a. The rate of return on assets measures management’s ability to productively employ all its resources. b. The rate of return on assets measures the return on all assets used regardless of how the assets are financed. c. The rate of return on assets is a measure of profitability. d. The rate of return on assets measures the return on the investment made by the owners of the entity. is B the correct answer?

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