Fixed assets

Assets. The assets of a company are divided into three broad categories current assets, fixed assets, and intangibles. 

Total Assets. The sum of current assets, fixed assets, deferred charges, and intangibles is called the total assets. 

To improve supply chain asset management efficiency The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets—fixed and working capital... 

In contrast to ciurent assets, fixed assets are part of the compare s productive capacity they are not therefore expected to be sold in normal trading operations and resale value is irrelevant what is needed is a measure of their value to the company. In practice, this is done by reducing their value each year in accordance with the company s depreciation pohcy. The value of certain types of fixed assets, in particular property, may increase rather than decrease. Public companies therefore usually arrange to have their property revalued at regular intervals (typically every five years or so) and include this valuation in the balance sheet. 

In contrast with current assets, fixed assets usually require more than a year to convert to cash and then only after a major organizational reorientation. Fixed assets in Table 10.2 are explained as follows ... 

Sales Total assets Fixed assets as % of sales Property as % of sales Plant as % of sales Vehicles as % of sales... 

Each year the capital allowance is a fixed percentage of the unrecovered value of the asset at the end of the previous year. The same comments about when the allowance can start apply. 

Working Ca.pita.1, Working capital is the money required for the day-to-day operation of the venture over and above the fixed investment. The amount varies daily, may be cycHcal, and can be a significant part of the investment in some cases. In the accounting sense, working capital is the difference between current assets and current HabiUties. 

Annual income or expenditure particularized by tbe subscript Annual allowances against tax other than for depreciation of fixed assets Annual writing down (depreciation) of fixed assets, allowable against tax Asset-turnover ratio defined by Eq. (9-131)... 

Debvered-equipment cost Capitabzed cost of a fixed asset defined by Eq. (9-47)... 

Thus (ROA) can be improved by increasing either (ATR) or (PM). A variation of Eq. (9-131) is the fixed-asset turnover ratio (FATR), defined as... 

The fixed assets in Eq. (9-133) and those included in the total assets in Eqs. (9-129) and (9-131) are usually taken at their written-down, or book, value, which may differ significantly from their market value. This is one disadvantage in using Eqs. (9-129), (9-131), and (9-133). 

A positive value of any term in Eq. (9-177) implies an increase in working capital, and a negative value a decrease. For example, the sale of fixed assets such as plant, buildings, land, etc., is a source of cash, and the purchase of fixed assets uses up cash. Similarly, an increase in financial resources in the form of loans and stock and bond issues is a source of cash, and a decrease in financial resources in the form of repayment of loans, retirement of stocks and bonds, and the payment of cash dividends uses up cash. (Note that a stock dividend as opposed to a cash dividend does not use up cash.)... 

Book values of fixed assets are determined by the balance-sheet annual depreciation charges Abd, which do not affect working capital. Although the accounting gain or loss on the sale of a fixed asset is based on its book value, working capital is not affec ted by depreciation assessments. 

Sometimes, fixed assets are purchased via short-term loans, which can lead to hquidity problems. For the most part, fixed assets should be financed from long-term or permanent capital such as stocks or bonds. The proven abihty of management to handle working capital efficiently will put a company in a better position to obtain such longterm capital when required, because the confidence of bankers and stockholders will have been obtained. 

Prepare a listing of all ABC Co. fixed assets at the location so that designated personnel can remove these from the site. ... 

Trade debtors Credit control Trade creditors Payroll Analyses Capital expenditure control Fixed assets registers Management accounts Annual accounts... 

Leasing. The asset is leased for a term of years at a fixed rental. The term can then be extended... 

Issue of debentures. These will normally carry a fixed rate of interest and have a predetermined date of redemption, possibly at a premium. The holders of debentures will usually require security perhaps by means of a fixed charge over specific assets (or all the assets), and will have a right of prior payment in the event of a liquidation. Debenture holders can also sometimes exercise their rights on the occurrence of certain events. Widespread security given to one class of lender can militate against the provision of shortterm finance from other lenders who require collateral. 

There is a formula for business failures based on Dun Bradstreet, Inc. annually published data. The vast majority of the firms involved are small. Why do failures occur D B has offered the following tabular explanation (apparent cause/percent) inadequate sales/49.9, competitive weakness/25.3, heavy operating expenses/13.0, receivables difficul-ties/8.3, inventory difficulties/7.7, excessive fixed assets/3.2, poor location/2.7, neglect/0.8, disaster/0.8, fraud/0.5, and others/1.1. Numbers do not add up to 100% because some failures are attributed to a combination of apparent causes. One can include that product design directly influences competitive weakness and heavy operating expenses. 

Most usually the pretreatment plant is a capital item fixed asset facility, but the trend is increasingly noticeable around the world today for the supply of properly conditioned MU water to be outsourced from a contractor, who either leases a mobile plant to the facility or generates a profit from the direct sale of water to the boiler plant. 

Costs in R D are a mix of short-run cost, dominated by the cost of clinical trials, and long-run cost, dominated by the fixed assets and specialized expertise of discovery and preclinical organizations. Therefore, when seeking to maximize the value of output relative to input, development teams need to be concerned with external spending and the length of tasks, whereas research teams need to look at their investments in capacity and the way they use fixed capacity. 

Here, marginal costs are lower than marginal revenues, so a profit is being made, but the level of contribution is not enough to maintain fixed assets and to leave sufficient profit to make the business worthwhile. This can be sustained for the short-term only, unless the enterprise is in some way contributing to the success of a more profitable product. 

One way of avoiding estimating the number of maintenance personnel is to base the cost of maintenance on the total sales. In 1972, this cost ranged between 3 and 9% of total sales with the largest chemical companies ranging between 6.1 and 7.4%.50 For the whole chemical industry, maintenance averaged 4.8% of the total fixed assets. 

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