A large body of scholarly literature exists relating to the subject of choices of accounting methods. The choice of depreciation methods is an example of these accounting choices. The choice of depreciation method affects several ratios.
Required:
1. Explain which financial statement ratios are affected by the choice of depreciation methods, with specific attention to the effects of straight-line vs. accelerated depreciation on the ratios.
2. Comment on the effects on financial statement users of the issues discussed in part 1.