ACCOUNTING ALTERNATIVES AND FINANCIAL RATIOS The 2008 annual report for Zimmer Cable included the following information on a change in the procedure for amortizing its investment in pay-TV programming:

In the first quarter of 2008, the Company changed the rate of amortization of its payTV programming costs to more closely reflect audience viewing patterns. The effect of this change was to reduce programming costs by $58 million and $57 million, resulting in increased net income of $35 million and $31 million, or $0.58 per share and $0.49 per share, during 2008 and 2007, respectively.

Required:

. Indicate which financial ratios would be affected by this change.

. Explain whether you would expect this change in amortization policy to affect the accounts by a larger or smaller amount in future years and why.

Exercise