Capital Cost Allowance (CCA)reduces a firm's ________ but increases a firm's ________.
A) revenue; cash flows
B) net income; cash flows
C) net income; total costs
D) revenue; total costs

Question

Quizplus · Accepted Answer

Capital Cost Allowance (CCA) is a way of deducting the cost of depreciable assets from a firm's profits, thereby reducing its net income. However, since CCA is a non-cash expense, it does not affect a firm's cash flows. In fact, CCA can actually increase a firm's cash flows if it results in a tax savings, which can be used to invest in new projects or pay dividends to shareholders. Therefore, CCA reduces a firm's net income but increases its cash flows.

Capital Cost Allowance (CCA)reduces a Firm's ________ but Increases a Firm's