Impairment Write-Down Recognition average, question, increase, because, elsewhere

whaler

The question is:

Defining total asset turnover as revenue divided by average total assets, all else equal, impairment write-downs of long-lived assets owned by a company will most likely result in an increase for that company in:

Answer is "both the debt-to-equity ratio and the total asset turnover.

My perspective: Yes, the asset turnover ratio must rise because the asset base decreases from the reduction in the PPE. Now, there must be a reduction elsewhere to balance out the A=L+E equation. Logically the Equity section reduces. But the answer key fails to say what part of the equity reduces. Is it the retained earnings that reduces?

Thanks for the feedback everyone.

kasinkei

Yeah, retained earnings as part of equity reduced because of decrease in net income