Ratios by Themselves Have Some Value, but Not Nearly as Much

question 99

Multiple Choice

Ratios by themselves have some value, but not nearly as much as they have when compared with other similar figures. Which of the following comparisons are generally used by managers and analysts?

• A)Historical
• B)Competition
• C)Budgeted
• D)All of the above

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Definitions:

Residual Value

The calculated estimate of what an asset will be worth when it reaches the end of its functional life.

Straight-Line Depreciation

Straight-line depreciation is a method of allocating the cost of a tangible asset over its useful life in equal annual amounts.

Book Value

The value of an asset as it appears on the balance sheet, determined by cost minus accumulated depreciation.

Depreciable Cost

The cost of an asset that is subject to depreciation over its useful life, excluding any salvage value.