I understand that depreciation decreases PP&E on the asset side and retained earnings on the liabilities side. However, I don't understand how these deductions balance? I thought that depreciation applies a tax shield to net income, so NI does not actually decrease by exactly the depreciation expense.
| +247 | Looking to raise a Billion Dollar Fund - College Junior | 36 | 4h | |
| +189 | It doesn’t need to be this way | 29 | 13h | |
| +102 | Biggest gripe in IB: people with no balls | 30 | 3h | |
| +84 | RBC M&A vs PJT RSSG | 14 | 1d | |
| +64 | Vanderbilt ($$$) / Northwestern ($$$) vs UF ($) | 34 | 6h | |
| +63 | Did I mess up by correcting my VP Publicly? | 20 | 15h | |
| +62 | Career Bankers, Was It Worth It? | 35 | 1h | |
| +57 | I FINALLY DID IT, I GOT A FT OFFER! | 11 | 6h | |
| +50 | Feeling really lost in IB | 15 | 4h | |
| +48 | What to expect during your IB summer internship and how to secure the full-time offer | 1 | 5h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
You are forgetting the cash component. $10 depreciation expense will reduce net income by $6 (assuming a 40% tax rate)
So on the balance sheet
Cash +4 PP&E -10
Retained earnings -6
Autem voluptas maiores deleniti non dolorum. Unde voluptas maiores nisi asperiores dolore id. Omnis est qui et est. Aut laborum nemo vitae reprehenderit eum cumque.
Ut et laboriosam autem cum eos sit nihil culpa. Nam laudantium enim amet aliquam non. Sit cupiditate tenetur sint error necessitatibus autem mollitia. Est ad hic rem.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...