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Depreciation is especially applicable when companies try to overvalue their assets and net worth; the lower their depreciation expense, the higher the company's profits.
Suggested Answer: A
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26 comments · newest first
AL
Alysa
8 months ago
True, companies might inflate profits this way.
EL
Ellsworth
8 months ago
True, but it can mislead investors.
RE
Rebecka
9 months ago
I disagree, it's B) False. Depreciation reflects asset value.
DE
Denny
9 months ago
Not sure if that’s the whole picture, though.
HO
Honey
9 months ago
Lower depreciation means higher profits, makes sense.
AR
Ardella
9 months ago
Surprised to see this, thought depreciation was a good thing!
GE
Gearldine
9 months ago
I disagree, it’s just accounting practice.
MA
Mattie
9 months ago
Ah, the age-old debate of depreciation vs. overvaluation. Fascinating!
AN
Annelle
10 months ago
False, depreciation is a legitimate accounting practice.
TA
Tashia
10 months ago
I vaguely recall that companies can manipulate depreciation methods, which could affect profits. But I’m torn on whether this statement is true or false.
BU
Buddy
10 months ago
True, depreciation can inflate profits.
TI
Tiera
10 months ago
I think it's A) True. Lower depreciation means higher profits.
CA
Cammy
10 months ago
True, that's how they cook the books!
RI
Richelle
11 months ago
Depreciation is the bane of my existence.
ST
Stevie
11 months ago
I feel like this statement is misleading. Depreciation is an expense that reduces taxable income, so I think it might actually be false.
GE
Geoffrey
11 months ago
I think we covered a similar question in class about how depreciation impacts financial statements. If depreciation is lower, profits might look better, but I’m not confident about the wording here.
ED
Edmond
11 months ago
I remember discussing how depreciation affects asset valuation, but I'm not sure if it directly relates to profit levels like this question suggests.
PR
Precious
11 months ago
Ugh, I hate questions about accounting principles. This feels like it's testing some subtle nuance that I'm just not grasping. I'm going to have to guess on this one - I'll go with B) False, but I'm not super confident.
EL
Elfriede
12 months ago
Okay, I've got a strategy for this. Depreciation is meant to match the expense of an asset's use with the revenue it generates. If a company tries to understate depreciation, that would inflate their profits, which seems like the definition of overvaluing their assets. I'm going with B) False.
NA
Na
12 months ago
Hmm, I'm a little unsure about this one. I know depreciation is important for accurately representing a company's financial position, but I'm not totally clear on how it relates to overvaluing assets. I'll have to think this through carefully.
LA
Lang
1 year ago
I think this is a pretty straightforward question. Depreciation is used to account for the loss in value of assets over time, so a lower depreciation expense would make profits appear higher. I'll go with B) False.
DA
Dana
7 months ago
Exactly! B) False makes more sense.
AL
Aleisha
7 months ago
But isn't it misleading?
ME
Merlyn
7 months ago
I think it's A) True. Lower depreciation does inflate profits.
RE
Rebecka
7 months ago
True, but I see your point.
SH
Shawna
8 months ago
I agree, it's definitely B) False.