Which of the following statements is FALSE? Depreciation is not a cash expense p

ID: 2800146 • Letter: W

Question

Which of the following statements is FALSE?

Depreciation is not a cash expense paid by the firm.

Depreciation expenses have a positive impact on free cash flow.

Depreciation expenses have a negative impact on free cash flow.

Firms often report a different depreciation expense for accounting and for tax purposes.

Depreciation is not a cash expense paid by the firm.

Depreciation expenses have a positive impact on free cash flow.

Depreciation expenses have a negative impact on free cash flow.

Firms often report a different depreciation expense for accounting and for tax purposes.

Answer is Depreciation expenses have a negative impact on free cash flow.

Since the depreciation is non-cash tax deductible expense and has positive impact on cash flow.

Also as per accounting policy and tax regulations depreciation varies.

Therefore 3rd statement is incorrect from all of the above.

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