- CFA Exams
- CFA Level I Exam
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 26. Long-lived Assets
- Subject 3. Depreciation Methods
CFA Practice Question
Under the accelerated depreciation method, ______
A. total asset turnover will be lower than that under the straight line method in the earlier years in the earlier years.
B. total asset turnover will be greater than that under the straight line method in the later years.
C. total asset turnover will be greater than that under the straight line method in the earlier years.
Explanation: Under accelerated depreciation, asset book values are lower than those under the straight-line method in the earlier years. Asset turnover is consequently higher under the former.
User Contributed Comments 3
| User | Comment |
|---|---|
| jamtime22 | A&B essentially apply to the same thing, therefor C has to be it. |
| poomie83 | the answer makes sense because asset t/o = sales/assets the numerator is not Net Income as would be the case for ROA. And the use of accelerated depn will have no effect as both total assets and net income are lower |
| bidisha | Thanks poomie |