• February 10th, 2017

Average useful life.

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

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