When depreciation becomes greater than gross investment, how will net investment be?
Answer and explanation
Correct answer: Negative
Use Net Investment = Gross Investment − Depreciation. If depreciation is greater than gross investment, subtracting the larger amount produces a negative value. This shows that investment has not replaced all the capital consumed during the period. Net investment is zero only when gross investment equals depreciation, and it is positive only when gross investment is larger.
Frequently asked questions
What is the correct answer to this question?
Negative
Why is this the correct answer?
Use Net Investment = Gross Investment − Depreciation. If depreciation is greater than gross investment, subtracting the larger amount produces a negative value. This shows that investment has not replaced all the capital consumed during the period. Net investment is zero only when gross investment equals depreciation, and it is positive only when gross investment is larger.
Which subject and chapter does this question cover?
This is a Class 11 Accountancy question. Chapter: Depreciation, Provisions, and Reserves.
