Ratios Are Meaningful Only When Used to Compare Performance with Rates

question 68

True/False

Ratios are meaningful only when used to compare performance with rates of prior years and with the industry averages.

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Definitions:

Salvage Value

The projected remaining value of an asset upon reaching the end of its productive lifespan, utilized to compute depreciation.

Book Value

The net value of a company's assets minus its liabilities, often used to estimate the company's worth if it were liquidated.

Capital-intensive

Capital-intensive describes a business process or industry that requires large amounts of capital investment in heavy machinery and equipment to produce goods or services.

Accelerated Depreciation

A depreciation method that allocates larger amounts of the cost of an asset to the earlier years of its useful life.