When Depreciating an Asset, the Residual Value Is Not a Prediction

question 90

True/False

When depreciating an asset, the residual value is not a prediction.

---

Definitions:

Financial Leverage

The use of borrowed funds to increase a company's investment potential, which can amplify both potential returns and potential losses.

Operating Leverage

Operating leverage refers to the degree to which a company or project can increase operating income by increasing revenue.

Total Leverage

The combination of operating leverage (affecting operating income) and financial leverage (affecting net income), indicating total risk.

Financial Leverage

The use of borrowed funds to finance the acquisition of assets, with the expectation that the profits made will be greater than the interest payable.