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Brandywine Homecare depreciation effects on net income, etc.

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Brandywine Homecare, a not-for-profit business, had revenues of 12 million in 2007. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was 1.5 million. All revenues collected in cash during the year and all expenses other than depreciation were paid in cash.

Suppose the change had halved, rather than doubled, the firm's depreciation expense. Now, what would be the impact on net income, total profit margin, and cash flow?

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Solution Summary

Brandywine Homecare, a not-for-profit business, had revenues of 12 million in 2007. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was 1.5 million. All revenues collected in cash during the year and all expenses other than depreciation were paid in cash.

Suppose the change had halved, rather than doubled, the firm's depreciation expense. Now, what would be the impact on net income, total profit margin, and cash flow?

Solution Preview

In 2007, they had revenue of 12 million and expenses that totaled 75% of revenue (9,000,000), with depreciation expense of 1.5 million. Let's look so far.

12,000,000 - 9,000,000 = 3,000,000 - 1,500,000 = 1,500,000 net income.

The revenues collected in cash only ...

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