Which of the following item provides the important function of shielding part of income from taxes?
Correct answer: D. Depreciation
- A. Inventory
- B. Supplies
- C. Machinery
- D. Depreciation
Explanation
Depreciation is a non-cash expense that reduces taxable income, creating a depreciation tax shield. Inventory, supplies, and machinery do not provide this tax benefit merely by being held.
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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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