You have been asked to provide some guidance to the management team of OHYA Corporation with respect to their asset management.

After reviewing their accounting policies, you notice a few items:

1. OHYA has replaced much of their equipment over the past fiscal year as they felt the old machinery was not as efficient. They believe the new equipment will increase output. Many of OHYA’s competitors use older machinery which has not been replaced for many years.
2. OHYA has decided to use a diminishing balance method of depreciation for this equipment, whereas most of OHYA’s competition uses a straight line method.

（Question）Management has asked you to prepare them for their annual investor call where many analysts will be in attendance.

1. What financial performance ratios may be in question based on the transactions and decisions OHYA has made related to their PP&E this year?
2. Which financial ratios would you expect to have positive result / negative result compared to OHYA’s competitors based on this information?
3. How would you explain the performance to an analyst?