Depreciation a. increases the net fixed assets as shown on the balance sheet. b.

Question

Depreciation a. increases the net fixed assets as shown on the balance sheet. b. is a noncash expense that is recorded on the income statement. c. reduces both the net fixed assets and the costs of a firm. d. is a non-cash expense which increases the net operating income. e. decreases net fixed assets, net income, and operating cash flows. Your firm has net income of $ 198 on total sales of $1,200. Costs are $715 and depreciation is $745. The tax rate is 34%. The firm does not have interest expenses. What is the operating cash flow? The cash ratio is measured as a. current assets divided by current liabilities. b. cash on hand plus inventory, divided by current liabilities. c. current liabilities plus current assets, divided by cash on hand. d. current assets minus cash on hand, divided by current liabilities. e. cash on hand divided by current liabilities.

Explanation / Answer

4. B is Correct, Depreciation is a Non Cash Expense and is Recorded in Income Statement. Net Fixed asset are calculated by deducting depreciation from previous year net fixed assets.

5. Operating Cash Flow=Net Income+Non Cash Expense+Change in Working Capital

= 198+145=$343

6. E is Correct, Cash Ratio=Cash and Cash Equivalent/Current Liabilities

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