One means to negate the effect of inflation on ratio analysis is to value the fixed assets at
A) replacement value.
B) liquidation value.
C) book value.
D) depreciation.

Question

Quizplus · Accepted Answer

Valuing fixed assets at replacement value adjusts for inflation and provides a more accurate reflection of the current value of the assets. Liquidation value and book value do not necessarily reflect current market conditions and may not account for inflation. Depreciation is a method of allocating the cost of an asset over its useful life, but it does not directly address inflation.

One Means to Negate the Effect of Inflation on Ratio