Discuss Forum
1.
Which of the following is not a cash outflow for a firm?
- A. Dividends
- B. Dividends
- C. Dividends
- D. Dividends
Answer: Option C
Explanation:
Depreciation is a non-cash expense. It represents the allocation of the cost of an asset over its useful life. While it is recorded on the income statement, it does not involve an actual cash outflow. The asset itself is already purchased and paid for. Depreciation is simply a way of accounting for the decrease in the value of the asset over time.
Why other options are incorrect:
Why other options are incorrect:
- Dividends: Dividends are payments made to shareholders, which clearly represent a cash outflow.
- Interest payments: Interest is the cost of borrowing money. It is a financial obligation and thus a cash outflow.
- Taxes: Taxes are payments made to the government, also representing a cash outflow.
- Utilities: Utilities, such as electricity and water, are expenses that require cash payments to maintain operations.
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