18.2. Causes of Depreciation

Try these first

1. 1.

   Define wear and tear in your own words.

   Hint

   Think about how your personal items lose quality over time.

2. 2.

   What does obsolescence mean?

   Hint

   Consider electronics and how quickly they become old-fashioned.

3. 3.

   What is the primary cause of depreciation due to usage?

   • Wear and Tear
   • Obsolescence
   • Depletion

   Hint

   Think of the condition of shoes after long use.

4. 4.

   True or False: Obsolescence occurs when an asset becomes outdated.

   • True
   • False

   Hint

   Look at how quickly tech advances.

5. 5.

   If a factory has machines that have endured heavy usage for five years, how would you assess their wear and tear for depreciation purposes?

   Hint

   Use depreciation methods to evaluate value loss.

6. 6.

   Analyze how companies could mitigate risks associated with obsolescence in their asset management strategies.

   Hint

   Consider how tech firms keep releasing new versions.