Company a Uses an Accelerated Depreciation Method While Company B

question 112

Multiple Choice

company A uses an accelerated depreciation method while Company B uses the straight -line method. All other things equal, during the first few years of the asset's use, Company B will show which of the following compared to Company A?

• A) A smaller fixed asset turnover ratio and a smaller gain on asset disposal.
• B) A larger fixed asset turnover ratio and a larger gain on asset disposal.
• C) A smaller fixed asset turnover ratio and a larger gain on asset disposal.
• D) A larger fixed asset turnover ratio and a smaller gain on asset disposal.

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Definitions:

Capital Budgeting

The act of strategizing and overseeing a firm's long-term commitments to investments, projects, and assets.

Cash Flows

Cash flows refer to the net amount of cash and cash-equivalents being transferred into and out of a business, indicating its financial health.

Partnership Income

The share of earnings distributed to partners in a partnership business, typically based on the terms of the partnership agreement.

Personal Income

Personal income is the total earnings received by an individual, including wages, investments, and benefits, used to evaluate financial health.