Could you explain the following questions in more detail? I don't understand the explanations. Thank you.
According to the income statement given, Water and Power Co.'s earnings before interest, taxes, depreciation, and amortization (EBITDA) was $1,000 which of the following statements will be correct? Check all that apply. Water and Power Co.'s EBITDA will remain unchanged. X Water and Power Co. will have a lower net income. Water and Power Co. will pay more in taxes. X Water and Power Co.'s operating income will decrease. X Water and Power Co. will have a higher net income. Explanation: Close Explanation EBITDA-an acronym for earnings before interest, taxes, depreciation, and amortization-is calculated by subtracting the operating costs, excluding depreciation and amortization. You can also calculate EBITDA by adding depreciation and amortization expenses back into the EBIT (the operating income). So a decrease in the annual depreciation expense will have no impact on the EBITDA. It will remain unchanged. Because the annual depreciation expense will decrease, a lesser amount will be deducted from the net sales, and the company's operating income (EBIT) will thus increase. Interest expenses will remain the same, so a higher operating income will lead to a higher taxable income tax rate does not change; therefore the company will pay more in taxes, but the increase in taxes will be smaller than in the in income, and therefore the company's net income will increase. According to the income statement given, Water and Power Co.'s earnings before interest, taxes, depreciation, and amortization (EBITDA) was $1,000 which of the following statements will be correct? Check all that apply. Water and Power Co.'s EBITDA will remain unchanged. X Water and Power Co. will have a lower net income. Water and Power Co. will pay more in taxes. X Water and Power Co.'s operating income will decrease. X Water and Power Co. will have a higher net income. Explanation: Close Explanation EBITDA-an acronym for earnings before interest, taxes, depreciation, and amortization-is calculated by subtracting the operating costs, excluding depreciation and amortization. You can also calculate EBITDA by adding depreciation and amortization expenses back into the EBIT (the operating income). So a decrease in the annual depreciation expense will have no impact on the EBITDA. It will remain unchanged. Because the annual depreciation expense will decrease, a lesser amount will be deducted from the net sales, and the company's operating income (EBIT) will thus increase. Interest expenses will remain the same, so a higher operating income will lead to a higher taxable income tax rate does not change; therefore the company will pay more in taxes, but the increase in taxes will be smaller than in the in income, and therefore the company's net income will increase
