Which statement about depreciation is true?

A) The more depreciation a firm reports, the higher its tax bill, other things held constant.
B) Depreciation reduces a firm's cash balance, so an increase in depreciation would normally lead to a reduction in the firm's net cash flow.
C) Net Cash Flow = Net Income + Depreciation and Amortization Charges.
D) Depreciation and amortization are not cash charges, so neither has an effect on a firm's reported profits.

Depreciation

This is the systematic allocation of the cost of a tangible asset over its useful life. It reflects the consumption of the asset over time.

Tax Bill

A tax bill is an official statement from a governmental authority specifying the amount of taxes owed by an individual or organization for a certain period.

Net Cash Flow

The amount of cash that is generated or lost by a business in a given period, after accounting for all cash inflows and outflows related to operational, investing, and financing activities.