Question 3: Analyzing changes in accounting methods (8 marks) You are analyzing ABC...
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Question 3: Analyzing changes in accounting methods (8 marks) You are analyzing ABC Company, a capital intensive company that operate in the transport industry. A diligent reading of its annual report of year 2015 &2016 reveal that the company had changed in its estimated useful lives of its fixed assets as follow: ABC Company Estimated useful lives for machinery Year 2015 10 years 20 years Year 2016 You know that the change of the estimated useful lives of fixed assets will have some impact on both the profit & loss statement, the balance sheet and on some ratios. Required: Consider whether the following ratios will be higher, lower or the same for ABC Company in year 2016 when compared to year 2015. Explain your answers. a. Return on Equity (3 marks) b. Price to Book ratio (3 marks) c. Cash Flow from Operations (2 marks) Please present your answers in a table format
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