Which of the following is the least effective way for an analyst to understand whether existing long-lived assets must be replaced?
A) understand industry conditions and firm strategies for capital expenditure growth
B) calculate the average age of depreciable assets
C) calculate the percentage of ownership the firm has in another entity
D) calculate the proportion of depreciable assets consumed

Question

Quizplus · Accepted Answer

Calculating the percentage of ownership the firm has in another entity does not provide any information about the condition or lifespan of the firm's own long-lived assets. This information is irrelevant to understanding whether existing long-lived assets must be replaced. A, B, and D are all effective ways for an analyst to understand whether existing long-lived assets must be replaced. A helps to understand if the firm is planning on investing in capital expenditures, which could indicate that existing assets need replacing. B helps to understand the average age of the assets and if they have reached their useful life. D is based on the proportion of depreciable assets consumed and provides insight into the remaining lifespan of the asset.

Which of the Following Is the Least Effective Way for an Analyst