Although depreciation is a non-cash charge, it still affects the cash budget. True False

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Question

Although depreciation is a non-cash charge, it still affects the cash budget. True False

Although depreciation is a non-cash charge, it still affects the cash budget.

True

False

business finance

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Answer 1

Answer #1

True: Although depreciation is a non-cash charge, it still affects the cash budget.

Reason:

Depreciation is non-cash item but it is deducted from income of the firm which reduces the tax liability of firm ultimately and subsequently impacts the cash out flows. Higher depreciation will lead to less tax (less cash outflow) hence, there will be lower cash outflow.

Higher the depreciation lower the tax hence lower cash outflow and vice versa.

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Answer 2

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Although depreciation is a non-cash charge, it still affects the cash budget. True False

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Although depreciation is a non-cash charge, it still affects the cash budget. True False

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