Investment in long-term assets
Hi all the monkeys out there!
Reading Damodaran's little book of valuation, I was wondering why he writes that Capex-D&A= investment in long-term assets but I don't get it. Is that because it means investment in new assets? Anyone could help?
Anyone?
Depends on what you include in Capex ?
I think it has to do with the fact that D&A is a proxy for the wear and tear of existing long-term assets, so that if your CAPEX = D&A you are only maintaining your long-term asset base. So, CAPEX - D&A is the investment in new assets.
D&A is a proxy for short-term expenditures on fixed assets, in the sense that it is sometimes considered to be part of the core cash producing portion of operations. In other words, you accumulate depreciation on the balance sheet similar to other current assets like prepaids, until it is expensed on the income statement. CAPEX has a useful life typically 1+ years, or long-term. Subtracting the current portion of CAPEX leaves you with just the long-term piece of expenditure on fixed assets. That's how I look at it..
Et quia ipsam autem consequatur id quo voluptas. Labore velit quos veritatis dolorum omnis. Quo doloremque dolor aperiam. Ab autem quos distinctio veniam similique. Quia autem cupiditate iure eos dolorem aliquid maiores. Ut ea assumenda et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...