Plant Assets - existing assets and is likely to show up...

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Plant Assets Plant assets are resources that have physical substance (a definite size and shape), are used in the operations of a business, and are not intended for sale to customers. They are called various names— property, plant, and equipment; plant and equipment; and fixed assets. By whatever name, these assets are expected to provide service to the company for a number of years. Except for land, plant assets decline in service potential (value) over their useful lives. Plant assets are critical to a company's success because they determine the company's capacity and therefore its ability to satisfy customers. With too few planes, for example, AirTran and Southwest Airlines would lose customers to their competitors. But with too many planes, they would be flying with empty seats. Management must constantly monitor its needs and acquire assets accordingly. Failure to do so results in lost business opportunities or inefficient use of
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Unformatted text preview: existing assets and is likely to show up eventually in poor financial results. It is important for a company to (1) keep assets in good operating condition, (2) replace worn-out or outdated assets, and (3) expand its productive assets as needed. The decline of rail travel in the United States can be traced in part to the failure of railroad companies to maintain and update their assets. Conversely, the growth of air travel in this country can be attributed in part to the general willingness of airline companies to follow these essential guidelines. For many companies, investments in plant assets are substantial. Illustration 9-1 shows the percentages of plant assets in relation to total assets in various companies. Illustration 9-1 Percentages of plant assets in relation to total assets...
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 201 taught by Professor - during the Spring '11 term at Montgomery.

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