Question

Pick the correct statement related to depreciation from below.

Multiple Choice

• Depreciation reduces both the net fixed assets and the costs of a firm.

• Depreciation reduces taxes but not net income.

• None of the given statements is correct.

• Depreciation is a noncash expense which also decreases the net income.

• Depreciation decreases net fixed assets, net income, and operating cash flows.

James will make sure that he will consider ______________ in working out the financial plan for his firm sometime next week.

I. the net working capital needs

II. the products to be sold in Mexico

III. the employees to be hired locally

IV. the customers to whom the firm's products are sold

Multiple Choice

• I only

• III only

• II, III, and IV only

• I and III only

• IV only

Answer 1

Depreciation is a non-cash expense that is charged against income. It reduces fixed assets and income but not the cash flows as no cash involved in charging depreciation. It leads to savings in taxes

Hence, the correct statement is:

• Depreciation is a noncash expense which also decreases the net income.

• I and III only

Under financial plan, the cost of working capital and employees has to be considered

The products and customers are non-financial items