AFM101 Chapter Notes - Chapter 9: Intangible Asset, Capital Asset, Book Value
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AFM101 Full Course Notes
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Document Summary
Chapter 9: reporting and interpreting property, plant, and equipment; natural resources; Acquisition and maintenance of property, plant, and equipment. Long-lived assets (or long-term assets or capital assets: tangible. Fixed asset turnover ratio: how effective management uses its ppe to generate revenue; the number of dollars from sales generated by using fixed assets. High ratio = effective management; low ratio = inefficient management. Increasing ratio = more efficient use of fixed assets. Caution: firm is cutting back on capital expenditure (expect downturn in business) Decreasing ratio = less efficient use of fixed assets. Caution: firm is increasing capital expenditure indicates expansion (expect future higher sales) Costs are capitalized when they are recorded a part of assets instead of expenses (added to purchase price of capital asset) ie. sales taxes, legal fees, transportation costs, and installation costs. Acquisition cost: the net cash-equivalent amount paid to be paid for the asset. Various acquisition methods: for cash, for debt: