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Operating model

PP&E and depreciation schedule

Roll forward PP&E with capex and straight-line depreciation by vintage.

25 minintermediateMembers

Learning objectives

  • Roll forward net PP&E: opening + capex − depreciation = closing
  • Forecast depreciation separately for existing assets and new capex
  • Interpret the capex-to-depreciation ratio

For a store-based retailer, capex is the price of growth: fit-outs for new stores, refurbishments and systems. It is also one of the largest cash outflows: Rawdah Home Retail Co. spent 96.0 in FY2025A, more than its net income of 95.2.

The PP&E schedule links three statements at once. Capex is a cash outflow on the cash flow statement. Depreciation is an expense in the income statement and a non-cash add-back on the cash flow. Closing net PP&E goes to the balance sheet.

PP&E roll-forward

Closing net PP&E = Opening net PP&E + Capex − Depreciation

Depreciation, existing
FY2025A net PP&E ÷ remaining useful life (straight-line)
Depreciation, new
cumulative capex to date ÷ useful life of new assets

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