The effect of patent amortization on cash flow is conceptually identical to that of
A)common stock.
B)preferred stock.
C)depreciation.
D)research and development.
E)treasury stock.

Question

Quizplus · Accepted Answer

Patent amortization is the process of spreading the cost of purchasing a patent over its useful life. This is similar to depreciation which spreads the cost of assets over their useful lives. Both patent amortization and depreciation reduce taxable income which in turn reduces cash outflows for taxes. Therefore, the effect of patent amortization on cash flow is conceptually identical to that of depreciation.

The Effect of Patent Amortization on Cash Flow Is Conceptually