The table below summarizes the early year impacts on selected financial reporting items by choosing the straight-line method versus an accelerated depreciation method.
|Earnings, Equity, Profit Margins||Higher, as depreciation expense is lower in early years.||Lower, as depreciation expense is higher in early years.|
|Current Ratio||No impact because the current ratio relates to short-term assets.||No impact because the current ratio relates to short-term assets.|
|Total Pre-Tax Cash Flow||No change.||No change.|
|Asset Turnover||Lower, as asset values are higher in the early years.||Higher, as asset values are depreciated up front.|
|Debt-to-Equity Ratio||Lower, as equity is higher driven by higher earnings in the early years.||Higher, as equity is lowered in the early years with an elevated depreciation expense.|