Depreciation expense produces a cash outflow of funds, because it reduces the firm's earnings.

Name: Depreciation expense produces a cash outflow of funds, because it reduces the firm's earnings.
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Question

Depreciation expense produces a cash outflow of funds, because it reduces the firm's earnings.​

Quizplus · Accepted Answer

Depreciation is a non-cash expense and does not directly result in a cash outflow. It is deducted from the revenue to calculate net income and the resulting amount is subject to taxes. However, there may be some tax benefits associated with depreciation that can indirectly affect the firm's cash flow.

Depreciation Expense Produces a Cash Outflow of Funds, Because It