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Operating Assets Turnover And Depreciation Of Operating Assets

Question

Following are selected footnote disclosures from Parson’s (an outdoor adventure superstore) financial statements:

5. PROPERTY AND EQUIPMENT

 

 

 

 

Depreciable Life

 

 

 

in Years

2011

2010

Land and improvements

Up to 20

$169,839

$169,398

Buildings and improvements

7 to 40

549,793

500,193

Furniture, fixtures and equipment

3 to 15

516,323

444,948

Assets held under capital lease

Up to 30

14,363

14,363

Property and equipment

 

1,250,318

1,128,902

Less accumulated depreciation and amortization

 

(413,993)

(363,608)

 

 

836,325

765,294

Construction in progress

 

30,574

52,653

 

 

$866,899

$817,947

Required:

a. Compute the PPE turnover for 2011 (Total revenue in 2011 is $2,811,166 thousand). Does the level of its PPE turnover suggest that Parson’s is capital intensive? (Hint: The median PPE turnover for all publicly traded companies is approximately 1.3.)

b. Do you believe that Parson’s balance sheet reflects all of the company’s operating assets?

c. Parson’s reported depreciation expense of $71,343 thousand in 2011. How much of this related to Land and improvements? How much of this expense related to Construction in progress? Explain.

d. Assuming that Parson’s uses straight-line depreciation, estimate the useful life of its depreciable PPE assets.

Summary

The question belongs to Finance and it deals with questions about a company whose PPE turnover needs to be calculated. The operating assets being reflected in the balance sheet and estimating the depreciation of the PPE assets.

Total Word Count 145

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