Which one of the following statements related to an income statement is correct?
A) Interest expense increases the amount of tax due.
B) Depreciation does not affect taxes since it is a non-cash expense.
C) Net income is distributed to dividends and paid-in surplus.
D) Taxes reduce both net income and operating cash flow.
E) Interest expense is included in operating cash flow.

Question

Quizplus · Accepted Answer

Taxes reduce net income because they are an expense that must be paid out of earnings. They also reduce operating cash flow because the cash used to pay taxes is no longer available for other operational needs.

Which One of the Following Statements Related to an Income