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UESTION 1 'Average useful life', 'Average age of PPE assets' and 'Asset Turnover' are three measures that decision makers can use to analyse the PPE...

UESTION 1
  1. 'Average useful life’, ‘Average age of PPE assets’ and ‘Asset Turnover’ are three measures that decision makers can use to analyse the PPE (Property, Plant & Equipment) assets of entities. Fresh Food Ltd and Cheap Food Ltd operate in the same industry. Each entity depreciates its PPE (Property, Plant & Equipment) assets using the straight line approach. An investigation of their financial statements reveals the following information:

      (Amounts in millions)
      Fresh Food Ltd Cheap Food Ltd
    Sales $ 22,653 $ 33,812
    Total Assets (Average) 22,088 36,167
    Accumulated Depreciation 2,701 4,359
    Depreciation Expense 381 697
    Cost of Plant Assets (Average) 7,715 10,237

    Required:

    What conclusion concerning the management of plant assets can be drawn from these data?  (word limit: 180 – 240 words)

     


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Depreciation - Copy.docx

From the provided data regarding the two companies, I would conclude that for Fresh food
limited, its assets turnover ratio of 1.02(22653/20088). This implies that the return on assets for
the...

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