Difference between revisions of "AE22"

Latest revision as of 14:48, 10 June 2017

Asset Depreciation Ratio measures the average accumulated depreciation for investments made in Property, Plant And Equipment (PP&E) (calculating the average of beginning and year-end accumulated depreciation).

Calculation

where

• Beginning Asset Depreciation = Value of Assets Depreciation at the start of the reporting period
• Ending Asset Depreciation = Value of Assets Depreciation at the end of the reporting period

Unit of measure: MU (Monetary Unit)

Importance

Companies or supply chains with a low Asset Depreciation Ratio are desirable. An increase over time can be indicative of a problem: Insufficient cash is generated to replace aging equipment. It's also important to assess the company's value versus a benchmark, since ratios may be indicative of the durability of the assets within an industry.

In order to understand what constitutes good or bad Asset Depreciation Ratio it should always be compared to industry standards and the ratios of other companies that are similar in size.

Notes

Accumulated Asset Depreciation:

• Includes only the accumulated depreciation for Property, Plant And Equipment (PP&E) the company currently owns
• Includes only the portion of the accumulated depreciation for assets allocated to the supply chain

0.00

(0 votes)