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Quick Definition

Measures how well a company replaces its long term, or fixed assets.

There's More to Financial Analysis Than You Think...

The Financial Analysis Success Kit can help!

Why you should take a look at the Financial Analysis Success Kit:

We've combined all our highly popular financial analysis tools into one mega-financial-analysis-kit that will save you hundreds of dollars if purchased separately. The kit contains 9 files packed with the most important financial ratio analysis tools you can find to help rocket your way to mastering financial analysis. The kit includes:

  1. The eBook "Learn Ratio Analysis In Minutes"

  2. The Learn Financial Ratio Analysis Excel Spreadsheet (2 versions!)

  3. A BONUS eBook..."Key Financial Statement Terms"

  4. Another HUGE BONUS...Five-Part Financial Ratio Cheat Sheet Series

The result? You get all these professionally created tools for a great low price.

Learn more on our product page:

Click the button to learn more about the Financial Analysis Success Kit

 

financial ratio analysis success kit

Click the button to learn more about the Financial Analysis Success Kit

Depreciation to Fixed Assets Formula

Explanation of Depreciation to Fixed Assets

The Depreciation to Fixed Assets ratio measures how diligently the company is replacing its old fixed assets with replacements. Companies will often aquire fixed assets such as new buildings, processes and machinery, and automation with hopes of gaining increased sales over the lifespan of those assets.

Importance of Depreciation to Fixed Assets

An increasing Depreciation to Fixed Assets ratio may indicate the company has purchased new fixed assets, showing the company is making improvements to its operations. A decreasing Depreciation to Fixed Assets ratio may indicate the company’s purchase plans for new fixed assets has stalled, possibly indicating increasingly constrained budgets or a lack of priority of gaining new assets.

The Depreciation to Fixed Assets ratio will vary widely among different industries, and measurement of this ratio needs to be done in the context of the industry the company operates within. Companies in industries whose operations require large purchases of assets that also depreciate rapidly will often record higher amounts of depreciation than companies who either do not purchase many fixed assets, or purchase assets that can be used far beyond the depreciation time span.