Increased depreciation expenses affect tax-related cash flows by

Question

Quizplus · Accepted Answer

When a business increases its depreciation expenses, it can reduce its taxable income which in turn reduces taxes. This reduction in taxes will result in an increase in cash flows related to taxes. Therefore, option B is correct. Option A is incorrect because the increased taxable income will lead to higher taxes, while option C is incorrect because while depreciation is a non-cash expense, it still affects taxes. Option D is also incorrect because depreciation alone cannot push a corporation into a higher tax bracket.

Increased Depreciation Expenses Affect Tax-Related Cash Flows by