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June 2023
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Accumulated depreciation assets6/2/2023 ![]() For example, infrastructure investments (buried natural gas pipelines, water treatment plants, transmission towers) may be in service for decades before needing replacement. The company's fixed assets have relatively long lives.Other reasons the ratio may grow over time include: ![]() Low ratios are desirable, while an increase to this ratio over time can be indicative of a problem. The accumulated depreciation to fixed assets ratio allows the investor-analyst to understand if a company is generating enough cash to replace aging equipment. CalculationĪccumulated Depreciation to Fixed Assets Ratio = Accumulated Depreciation / Fixed Assets Explanation ![]() An increase to the company's accumulated depreciation to fixed assets ratio can indicate management is struggling to find the cash necessary to make new investments. The accumulated depreciation to fixed assets ratio allows analysts to understand if new assets are being deployed by the company.
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