1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Elden [556K]
2 years ago
13

Why do we subtract depreciation in the calculation of EBIAT if we are going to add it back as the next step of the Free Cash Flo

w formula?
Business
1 answer:
vladimir1956 [14]2 years ago
3 0

Answer: Depreciation is tax deductible

Explanation:

Depreciation on assets is recognized by tax authorities as an expense that a business actually incurs so when the income statement is calculated, depreciation needs to be removed as the expense that it is so that taxes can be calculated on the profit.

Depreciation however, does not take actual cash from the company i.e the company does not actually pay anyone cash for depreciation like most other expenses. It needs therefore to be added back to the Free Cash Flow because the FCF deals with how much actual cash the company has which is something that Depreciation being a non-cash expense did not reduce.

You might be interested in
Ricardo works part time at a local computer store. One day, his manager approaches him about moving from cashier to floor superv
Ivenika [448]

Answer:Ricardo works part time at a local computer store. One day, his manager approaches him about moving from cashier to floor supervisor. Ricardo is excited because the promotion comes with a raise; however, the extra work hours would take away from time with his friends. In the end, he decides to take the promotion. Ricardo's opportunity cost is choosing the promotion over time with his friends.

<u>Explanation:</u>

When there are many options in front of us.Out of these options when we select one we have to forgo the other options. While we forgo other options we have to bear the loss. So the opportunity cost is the cost of the next best option that we have given up.

if Ricardo works extra hours than he will not get time to spend with his friends so this is his loss which is arising due to the benefit he is getting from promotion. This loss will be his opportunity cost.

8 0
3 years ago
A consumer is consuming at a point on her budget line. Her income is $50 a week, and she purchases hamburgers and grilled cheese
Ivahew [28]

Answer:

Each grilled cheese costs $1.25

Explanation:

Giving the following information:

Her income is $50 a week. Hamburgers cost $4, and she consumes 10 of them. She consumes eight grilled cheese sandwiches.

To calculate the price of the grilled cheese sandwiches, we need to use the following equation:

Income= cost of hamburgers*number of units + cost of grilled cheese*number of units

50= 4*10 + x*8

10=8x

$1.25= x= grilled cheese

3 0
3 years ago
How to beg your professor for a passing grade?
Vlad1618 [11]
Some tears will do the job.
6 0
3 years ago
If real GDP is $200 billion, full employment GDP is $500 billion, and the marginal propensity to consume is 0.75, then Congress
Anuta_ua [19.1K]

Answer:

The answer is: decrease taxes by $100 billion.

Explanation:

If the real GD is $200 billion, which represents only 40% of full employment GDP, then the government should try to increase consumer spending either by decreasing taxes or increasing government spending, or a combination of both.

In this case, I chose the tax decrease since government have budget limitations and they can only decrease taxes by so much before hitting a deficit. Additionally, when you have a large tax reduction, usually government spending either stays the same or decreases.

If the government decreases taxes by $100 billion, the marginal propensity to consume shall result in a $75 billion increase in consumption. According to the Keynesian Multiplier theory, that $75 billion should generate additional production, creating a virtuous cycle that should increase the real GDP in a larger proportion.

3 0
2 years ago
Leading guitar string producer wound up inc. has enjoyed a competitive advantage based on its proprietary coating that gives its
Rashid [163]

Answer:

(C) Direct imitation and Substitution

Explanation:

As a leading guitar string producer Wound Up inc. has enjoyed a competitive advantage based on its proprietary coating that gives its strings a clearer sound and longer lifespan than uncoated strings. One of Wound Up's competitors, has recently developed a similar coating using less expensive ingredients, which allows it to charge a lower price than wound up for similar-quality strings. Therefore and consequently, Wound Up's competitive advantage is in danger due to direct imitation and substitution. As it has been very much obvious from the given data that Wound Up was enjoying superior position in the market based on the clearer sound and longer lifespan of its guitars, which was purely due to their signature coating which they used on the strings. When on its competitor has developed the same kind of coating but even at the lesser rates, then of course, they can enjoy much better position in the market and they can compete much effectively with the Wound UP, both in quality and price as well. This direct imitation and substitution can lead Wound Up losing its competitive advantage, therefore, either they can develop the same strings at the less process or they have to come up with something totally new, creative and unique in order to win this competition now.

5 0
3 years ago
Other questions:
  • Jonas had a great résumé and a glowing recommendation from his previous employer. Impressed by his qualifications and expertise,
    5·1 answer
  • Which of the following types of business does not require an attorney to set up?
    11·2 answers
  • Shahia Company bought a building for $73,000 cash and the land on which it was located for $107,000 cash. The company paid trans
    8·1 answer
  • An analyst with a leading investment bank tracks the stock of Mandalays Inc. According to her estimates, the value of Mandalays
    14·1 answer
  • 1. In the study of communication, noise is best defined as _
    15·2 answers
  • Madison Davidson negotiated for a $30,000 loan with $200 monthly payments, plus 9 percent interest. In this case, what is the mo
    14·1 answer
  • Kirgan, Inc., manufactures a product with the following costs: Per Unit Per Year Direct materials $ 26.50 Direct labor $ 15.50 V
    9·1 answer
  • What are your goals for a job?
    11·1 answer
  • Describe the type of bond investment program you think the Shuman family should follow. In answering this question, give appropr
    15·1 answer
  • A young professional wishes to have $730000 in her retirement account. She invests $900 monthly in the account which earns 11.5%
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!