L7: Capital Structure and Asset Valuation Flashcards
1
Q
Why may depreciation be inaccurate?
A
- May not reflect market value
- Items with indefinite lines don’t depreciate (e.g. property)
2
Q
What is the key advantage and disadvantage of acquisition cost?
A
Prudent, but potentially undervalues asset
3
Q
What is a suitable method for rare or unique assets?
A
Depreciation replacement cost
