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Regional Production Corporation (RPQ is applying for a loan to purchase new machinery for its factory. As the lender's credit analyst, you have determined that
Regional Production Corporation (RPQ is applying for a loan to purchase new machinery for its factory. As the lender's credit analyst, you have determined that PPC's debt to equity ratio is sufficiently low to support additional debt, but to continue your investigation you are examining RPC's accumulated depreciation to fixed assets ratio. This ratio will allow you to examine the age of the assets and thus their remaining useful life as well as whether the company is generating sufficient cash to replace fixed assets on a timely basis. A low ratio generally means that the assets have plenty of life left in them and should be able to be used for years to come. A high ratio generally suggests the opposite. It's useful to track this metric over time to detect patterns and to compare it with industry norms. A quick Google search indicates the average ratio for RPC's industry is 30%. You have enlisted the assistance of your assistant to create a Tableau Dashboard depicting trends in depreciable assets, accumulated depreciation, and the accumulated depreciation to fixed assets ratio for the most recent six years for RPC. Accumulated Depreciation on Buildings & Equipment 2016 2017 2018 2019 Accumulated Depreciati. Buildings and Equipment 2020 2021 $25,000,... $20,000,... $15,000.... $10,000.- $5,000,000 Accumulate Buildings Accumulate Buildings Accumulate Buildings Accumulate Buildings Accumulate Buildings Accumulate Buildings Depreci.. and Equi. Depreci.. and Equ.. Depreci.. and Equi.. Depreci.. and Equ... Depreci.. and Equi.. Depreci.. and Equ... Accumulated Depreciation to Fixed Asset Ratio 60.09 50.0% 40.0% AND to Fixed Asset Ratio 30.09 20.09 10.09 0.09 2016 2017 2018 2019 2020 2021 Drawing from the data available, assess the following: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 What was the amount of accumulated depreciation in 2016 and in 2021? $3,167,089 in 2016 and $13,576,684 in 2021 $3,200,100 in 2016 and $13,644,223 in 2021 $ 13,644,223 in 2016 and $3,200,100 in 2021 Drawing from the data available, assess the following: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 What does the Dashboard suggest about RPC's accumulated depreciation during the most recent six years? Depreciation is increasing more rapidly than the growth in depreciable assets. The investment in buildings and equipment is consistent with the increase in accumulated depreciation The investment in buildings and equipment is higher than the increase in accumulated depreciation. Drawing from the data available, assess the following: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 What does the Dashboard suggest about RPC's accumulated depreciation to fixed assets ratio during the most recent six years? The ratio is increasing at a satistactory rate. The ratio is increasing quite rapidly and recently is above the industry average. The ratio is rising but within industry norms. Drawing from the data available, assess the following: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Which possible conclusion is not supported by the Dashboard concerning RPC's buildings and equipment during the most recent six years? Further investigation is warranted regarding RPC's ability to generate sufficient cash to replace fixed assets on a timely basis. Increases in depreciation are commensurate with the growth in depreciable assets. The data suggests a pattern of low new capital investments relative to depreciation expense
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