When asset reinvestment is not continuous,the increasing age of the asset base in conjunction with rising prices introduces distortions in various performance measures that make financial statement analysis difficult.

Question

Quizplus · Accepted Answer

This statement is true. As assets age and their values increase, various performance measures such as return on investment and asset turnover ratios may become distorted and less meaningful, making financial statement analysis more difficult. Continuous asset reinvestment can help to avoid or mitigate these distortions.

When Asset Reinvestment Is Not Continuous,the Increasing Age of the Asset