A growing firm often needs to acquire new fixed

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Unformatted text preview: through acquisition of fixed assets. A growing firm often needs to acquire new fixed assets rapidly, as in the purchase of property and plant facilities. Replacement As a firm’s growth slows and it reaches maturity, most capital expenditures will be made to replace or renew obsolete or worn-out assets. Each time a machine requires a major repair, the outlay for the repair should be compared to the outlay to replace the machine and the benefits of replacement. Renewal Renewal, an alternative to replacement, may involve rebuilding, overhauling, or retrofitting an existing fixed asset. For example, an existing drill press could be renewed by replacing its motor and adding a numeric control system, or a physical facility could be renewed by rewiring and adding air conditioning. To improve efficiency, both replacement and renewal of existing machinery may be suitable solutions. Other purposes Some capital expenditures do not result in the acquisition or transformation of tangible fixed assets. Instead, they involve a long-term commitment of funds i...
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This document was uploaded on 01/19/2014.

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