When a profitable corporation sells an asset at a loss,the after-tax cash flow on the sale will
A)exceed the pre-tax cash flow on the sale.
B)be less than the pre-tax cash flow on the sale.
C)be the same as the pre-tax cash flow on the sale.
D)increase the corporation's overall tax liability.

Question

Quizplus · Accepted Answer

When a profitable corporation sells an asset at a loss, the loss on the sale can be used to offset taxable income, effectively reducing the corporation's overall tax liability. This reduction in taxes increases the after-tax cash flow from the sale compared to the pre-tax cash flow, because the tax savings add to the total cash the company retains from the transaction.

When a Profitable Corporation Sells an Asset at a Loss,the