Depreciation expenses affect tax-related cash flows by
A) increasing taxable income, thus increasing taxes.
B) decreasing taxable income, thus reducing taxes.
C) decreasing taxable income, but not altering cash flows since depreciation is not a cash expense.
D) all of the above.

Question

Quizplus · Accepted Answer

Depreciation expenses lower taxable income, which in turn lowers taxes owed. However, depreciation is a non-cash expense, meaning it does not directly impact cash flows.

Depreciation Expenses Affect Tax-Related Cash Flows by