Which of the following statements is CORRECT? O The more depreciation a firm reports, the higher its tax bill, other things held constant. O People sometimes talk about the firm's net cash flow, which is shown as the lowest entry on the income statement, hence it is often called "the bottom line." O Depreciation and amortization are not cash charges, so neither of them has an effect on a firm's reported profits. O Net cash flow (NCF) is often defined as follows: Net Cash Flow Net Income + Depreciation and Amortization Charges. O 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.
Which of the following statements is CORRECT? O The more depreciation a firm reports, the higher its tax bill, other things held constant. O People sometimes talk about the firm's net cash flow, which is shown as the lowest entry on the income statement, hence it is often called "the bottom line." O Depreciation and amortization are not cash charges, so neither of them has an effect on a firm's reported profits. O Net cash flow (NCF) is often defined as follows: Net Cash Flow Net Income + Depreciation and Amortization Charges. O 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.
Chapter2: Financial Statements, Cash Flow, And Taxes
Section2.3: The Income Statement
Problem 5ST
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