Which one of the following statements is correct about the pro forma statements for a cost-cutting project which requires an initial investment in ﬁxed assets?

Question

Quizplus · Accepted Answer

The pro forma statements for a cost-cutting project which requires an initial investment in fixed assets will show annual pre-tax cost savings in the operating income. Option A is incorrect as depreciation is a non-cash expense but it affects the tax amount. Option C is not necessarily true as the net income may be negative in some periods but overall positive. Option D is incorrect as earnings before interest and taxes (EBIT) can be positive or negative depending on the project's performance. Option E is also incorrect as the tax amount should be positive if the project is acceptable and has positive earnings.

Which One of the Following Statements Is Correct About the Pro