Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 82

Critical Thinking: Analyzing the Impact of Alternative Depreciation Methods on Ratio Analysis
Speedy Company uses the double-declining-balance method to depreciate its property, plant, and equipment, and Turtle Company uses the straight-line method. The two companies are exactly alike except for the difference in depreciation methods.
Required:
1. Identify the financial ratios discussed in this chapter that are likely to be affected by the difference in depreciation methods.
2. Which company will report the higher amount for each ratio that you have identified in response to requirement 1 If you cannot be certain, explain why.