Asked by Brianna Austin on May 27, 2024
Verified
Holding all other variables constant, an increase in net income can be caused by a decrease in:
A) depreciation expense.
B) the cost ratio.
C) the tax rate.
D) Both a and c
E) a, b, and c are correct.
Depreciation Expense
The distribution of a physical asset's cost across its lifespan, mirroring its depreciation over time.
Tax Rate
The proportion of income or the value of a transaction that is collected by the government as tax, expressed as a percentage.
Net Income
The total profit of a company after all expenses and taxes have been deducted from total revenue, indicating the company's actual profitability.
- Assess the repercussions of changes in COGS and different factors on net income and tax liabilities.
- Familiarize with the principles and utility of depreciation, its treatment in accounting, and its impact on earnings and cash movement.
Verified Answer
SH
Sinothile HlabisaMay 31, 2024
Final Answer :
E
Explanation :
An increase in net income can be caused by a decrease in depreciation expense (as it reduces expenses), a decrease in the cost ratio (as it indicates lower costs relative to sales, improving profitability), and a decrease in the tax rate (as it reduces the amount of income taxed, leaving more net income).
Learning Objectives
- Assess the repercussions of changes in COGS and different factors on net income and tax liabilities.
- Familiarize with the principles and utility of depreciation, its treatment in accounting, and its impact on earnings and cash movement.