In cash flow estimation, depreciation shelters company's income from_______?
Correct answer: C. Taxation
- A. Expansion
- B. Salvages
- C. Taxation
- D. Discounts
Explanation
Depreciation is a non-cash expense, but it reduces taxable income and therefore lowers the tax payment. This tax saving is called the depreciation tax shield.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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