Which of the following statements is CORRECT?
A)The more depreciation a firm reports, the higher its tax bill, other things held constant.
B)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."
C)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.
D)Net cash flow (NCF) is often defined as follows: Net Cash Flow = Net Income + Depreciation and Amortization Charges.
E)Depreciation and amortization are not cash charges, so neither of them has an effect on a firm's reported profits.

Question

Quizplus · Accepted Answer

Net cash flow is calculated by adding back non-cash charges like depreciation and amortization to net income, as these do not affect the actual cash balance.

Which of the Following Statements Is CORRECT