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.
| +350 | Evercore Intern Seizure | 54 | 1h |
| +66 | JPM M&A is Gone??? Purely Coverage Banking??? | 31 | 1h |
| +58 | Is DCM actually underrated ? | 24 | 12h |
| +48 | Losing my personality in Banking | 9 | 12h |
| +48 | How do I understand vs. just memorizing? | 5 | 10h |
| +47 | Are all Tech / TMT groups sweaty? | 38 | 13h |
| +42 | Associate & Above IB exits | 16 | 3d |
| +32 | Incoming IB Analyst: Best Ways to Prepare? | 10 | 9h |
| +27 | Which groups are ideal for laterals? | 12 | 11h |
| +24 | The good and bad with Wells Fargo | 1 | 17h |
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
Enim cupiditate iure beatae quibusdam. Voluptates voluptatem animi aliquid consequatur.
Quos voluptas velit eaque fugit aspernatur quis. Consectetur est dignissimos aut neque ullam et modi consequatur. Nisi quod tenetur dignissimos rerum soluta sed.
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...