Which of the following statements is correct for a firm in which depreciation expense exceeds EBIT (Operating Income)? The firm:
A)will have a net loss.
B)will have no income-tax liability.
C)needs to lower its interest expense.
D)can still have a positive net income.

Question

Quizplus · Accepted Answer

A firm can still have a positive net income even if depreciation expense exceeds EBIT (Operating Income). This is because depreciation is a non-cash expense, and it does not affect the firm's cash flow.

Which of the Following Statements Is Correct for a Firm