Analysis of Investing Activities

Show me the calculation (provide the evidence - balance sheet/income statement)

In this section, you will evaluate results of management's investing decisions. First, you will determine selected characteristics of your firm's property, plant and equipment. Second, you will explore your firm's return on assets by analyzing asset turnover and profit margin. Lastly, you will analyze the profitability of your firm's segment.

1. Evaluate your company's investment in property, plant and equipment.

1. Determine the following amounts as reported by your firm on its most recent financial statements. You will probably have to inspect the notes to the financial statements to obtain some of the information.

1. Cost of property, plant and equipment
2. Accumulated depreciation
3. Depreciation expense
4. Cash paid for property, plant and equipment

2. Use the amounts above to answer the following questions

1. What percent of the cost of property, plant and equipment was written off as depreciation expense in the most recent year? ________________________
2. What does your answer imply about the average life of your company's property, plant and equipment?

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3. What percent of the cost of property, plant and equipment is in the accumulated depreciation account? _________________________________
4. On average, then, are the property, plant and equipment assets relatively new, relatively old, or in mid-life?

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5. What is the relationship between the cost of property, plant and equipment purchased during the year and cost of property, plant and equipment charged to the depreciation expense? Does this imply that your firm's productive capacity is growing, getting smaller, or staying about the same?