Sign up  |  Log in

Accelerated depreciation

Accelerated depreciation methods for financial reporting are most likely to have which of the following effects on a company’s financial ratios during the early years of an asset’s life?

a. Lower current ratio.

b. Higher asset turnover ratio.

c. Lower debt-to-equity ratio.

(b).  But why can’t the answer also be (a)?  

Thanks in advance.

You’re ready to take on the CFA Program, so stop guessing where you should begin. You give us your study dates, we’ll give you the study plan. Our adaptive activity feed breaks down your 300 hours into bite-sized weekly tasks that fit into your life.

because depreciation is applied to long-term assets, and the current ratio deals with more liquid short-term assets