When a company uses the net book value of its assets when calculating return on investment, it is possible that return on investment could increase over time even though there are not any actual improvements in operations.

Question

Quizplus · Accepted Answer

This is because the net book value of assets decreases over time due to depreciation, which can lead to an increase in the return on investment (ROI) calculation if earnings remain constant or do not decrease at the same rate, giving the illusion of operational improvement.

When a Company Uses the Net Book Value of Its