Which of the following measurements would not be affected by the choice of depreciation methods?
A)Debt-to-assets ratio
B)Total assets
C)Total cash flow from investing activities
D)Return-on-equity ratio

Question

Quizplus · Accepted Answer

Recognizing depreciation decreases assets (by increasing accumulated depreciation,a contra asset account)and stockholders' equity (retained earnings).It also increases expenses (depreciation expense),which decreases net income.Thus,the choice of depreciation methods impacts the debt-to-assets ratio (total liabilities ÷ total assets),total assets,and return-on-equity ratio (net income ÷ total equity).Depreciation does not affect cash flows.

Which of the Following Measurements Would Not Be Affected by the Choice