QUESTION 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)
