Which of the following statements is correct for a firm in which depreciation expense exceeds EBIT? The firm:
A)Will have a net loss
B)Will have no income-tax liability
C)Needs to lower its interest expense
D)Can still have a positive net income

Question

Quizplus · Accepted Answer

Depreciation expense is a non-cash expense, so it does not affect the firm's cash flow. Therefore, the firm can still have a positive net income even if depreciation expense exceeds EBIT.

Which of the Following Statements Is Correct for a Firm