Zhou Ltd and Wang Ltd, two entities of roughly the same size, are both involved in the

Question:

Zhou Ltd and Wang Ltd, two entities of roughly the same size, are both involved in the manufacture of canoes and kayaks. Each entity depreciates its PPE assets using the straight-line approach. An investigation of their financial statements reveals the following information.

Required

(a) For each entity, calculate these values:

1. average age of PPE assets.

2. average useful life.

3. asset turnover.

(b) Based on your calculations in part (a), comment on the relative effectiveness of the two entities in using their assets to generate sales. What factors complicate your ability to compare the two entities?

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