Commercial Awareness and Business Decision Making Skills
By Paul Rodgers

Depreciation ratios

There are several ratios associated with depreciation, but as we shall observe they must be used with caution.



These ratios only give meaningful results when:

  1. The method of depreciation is straight line

  2. The residual value is nil

  3. Estimates have not been changed over the life of the asset.

If the above do not apply then a misleading picture is obtained of the fixed asset portfolio.

Copyright Elsevier Ltd. 2007 under license agreement with Books24x7
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