If a firm's depreciation expense is cut by 25% in a period, which of the following will decrease as a result of this event? Net profit Cash flow
A) Yes Yes
B) Yes No
C) No Yes
D) No No

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense, so reducing it will not decrease cash flow. Instead, it will increase net profit since there is less expense deducted from revenue.

If a Firm's Depreciation Expense Is Cut by 25% in a Period