Net Property Plant Equipment Definition and Explanation

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Quick Definition

A company’s fixed assets, such as buildings, machines, and equipment.

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Explanation of Net Property Plant Equipment

Also called Capital, Long-Term, Long-Lived, or Tangible Assets and Listed on the Balance Sheet, these are the fixed assets of the company that do not get used up during the normal operation of the business. This is also why they are called long-lived.

Most of the value of these long-term assets depreciate (except land, which has an infinite life span), so the actual figure you will see will be the difference between the original cost and the cumulated depreciation. This depreciation is spread over the “useful life” of the fixed asset.

Importance of Net Property Plant Equipment

Depending on the industry of the company, the figure for Net Property, Plant, and Equipment can vary widely. For example, service companies with low amounts of equipment and buildings would be expected to have a relatively low figure. In contrast, manufacturing would be expected to have significantly more of fixed assets, as they require machines and manufacturing facilities, warehouses, and logistics infrastructure to produce their products.