The choice of depreciation methods for long-term assets affects the results of financial analysis for a company.

Question

Quizplus · Accepted Answer

The choice of depreciation method affects how much of the cost of a long-term asset is allocated as an expense in each accounting period, and therefore affects the net income, balance sheet, and cash flow statement of the company. Different depreciation methods can have different impact on the financial ratios and metrics used in financial analysis, such as return on assets, debt-to-equity ratio, and free cash flow. As a result, the choice of depreciation method should be carefully considered based on the company's strategy, accounting policies, and regulatory requirements.

The Choice of Depreciation Methods for Long-Term Assets Affects the Results