Question

Example: Calculate PPE turnover, average useful life and percent used up for Lowe’s Companies Inc. (fiscal year end of February). Compare the ratios with those of Home Depot, which has PPE turnover of 3.9; average useful life of 16.3 years; and percent used up of 56%

$ million	2018	2017	2016
Revenue	$68,619	$65,017	$59,074
Depreciation expense	1,540	1,590	1,587
Gross PPE	36,940	36,918	35,913
Accumulated depreciation	(17,219)	(16,969)	(16,336)
Net PPE	19,721	19,949	19,577
Footnote data
Land	7,414	7,329	7,086
Building	18,521	18,147	17,451
Machinery	10,475	10,978	10,863
Construction in progress	530	464	513
PPE turnover
Average useful life
Percent used up

Answer 1

PPE Turnover

PPE Turnover is used to measure operating performance, it is calculated by Net sales to fixed assets, it measures the how company generates its sales from fixed assets.

PPE Turnover = Net sales/PPE

Net sales

2018	2017	2016
$68,619	$65,017	$59,074

Net PPE

2018	2017	2016
$19,721	$19,949	$19,577

PPE Turnover

3.48

3.26

3.02

Useful Life

Gross value of assets (Excluding land) / Depreciation

                                                            2018                     2017                     2016

Building                               18,521                  18,147                  17,451

Machinery                                         10,475                  10,978                  10,863

Construction in progress 530                       464                       513       

Total                                                   29,526                  29,589                  28,827  

Depreciation                                     17,219                  16,969                  16,336

Useful life                                         1.7 years             1.7 Years             1.8 Years            

Percentage used upto

100% - (Net PPE/Gross PPE)                         (2018) 100% - (19,721/36,940*100) = 47%

(2017) 100% - (19,949/36,918*100) = 46%            

(2016) 100% - (19,577/35,913*100) = 45%