All of the Following Are Major Problems with Using Book

question 25

Multiple Choice

All of the following are major problems with using book value EXCEPT

• A)the original cost of an asset might bear no relation to its current value.
• B)depreciation is an arbitrary,but nonsystematic,method of transferring asset value to expense.
• C)internally developed assets,such as patents,trademarks,and trade secrets do not have book value.
• D)Depreciation makes no attempt to measure actual loss of value of an asset.

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Definitions:

Inventories

Quantities of goods or materials on hand or in process of manufacture, storage, or transport.

Asset Turnover

Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within a year or within the operating cycle of a business, like cash, inventory, and receivables.

Total Assets

The sum of all resources owned by an entity, including both current and non-current assets, which can be used to generate value or meet obligations.