The use of accelerated versus straight-line depreciation causes net income reported to stockholders to be lower, and cash flows higher, during every year of a project's life, other things held constant. True or false?

Question

Julianne Clarke

Business

10 March, 00:05

The use of accelerated versus straight-line depreciation causes net income reported to stockholders to be lower, and cash flows higher, during every year of a project's life, other things held constant. True or false?

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Answers (1)

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Nasir Booth · Answer 1

False

Explanation:

The reason is that the depreciation is a notional expense which is the distribution of the assets value over its useful life. So it is non cash flow item and does not increases the cash flows for the year so saying that it increases the cash flows is totally incorrect statement.