ACCT605- Depreciation Analysis

-ASSIGNED PUBLICLY TRADED MANUFACTURER IS NESTLE, S.A. SEC 10-K LINK FOR FINANCIAL STATEMENTS IS

https://www.nestle.com/investors/publications

-DO NOT USE CHATGPT

-YOU MAY UTILIZE THE FOLLOWING LEARNING MATERIAL FROM UNIT 4

https://openstax.org/books/principles-financial-ac…

https://openstax.org/books/principles-finance/page…

https://courses.lumenlearning.com/wm-financialacco…

-PLEASE SHOW ALL FORMULAS AND FIGURES USED

-PLEASE FORMAT IN APA FORM

-PLEASE ALSO INCLUDE A COMPARISON OF NESTLE, S.A.’S DEPRECIATION EXPENSE AND FIXED ASSET TURNOVER RATIO AS INDICATED IN “CRITERIA FOR SUCCESS” SECTION TO MONDELEZ INTERNATIONAL. YOU MAY UTILIZE THE FOLLOWING LINK FOR MONDELEZ INTERNATIONAL’S FINANCIAL STATEMENTS

https://www.zacks.com/stock/quote/MDLZ/income-stat…

Unit 4 Assignment Directions: Depreciation Analysis

Purpose

Using your publicly traded manufacturing company, you will explore depreciation.

Task

1. Identify the different depreciation methods used by the company.

The company’s financial statements will disclose the depreciation methods used for each class of fixed assets. For example, the company may use the straight-line method for buildings and equipment, and the units-of-production method for machinery.

1. Calculate depreciation expense for each class of fixed assets, using the following formula:

Depreciation expense = (Cost of asset – Estimated salvage value) / Useful life

The cost of the asset, salvage value, and useful life can be found in the company’s financial statements or in its annual report.

1. Calculate the fixed-asset turnover ratio, using the following formula:

Fixed-asset turnover ratio = Net sales / Average fixed assets

Net sales can be found on the company’s income statement, and average fixed assets can be calculated by averaging the beginning and ending balances of fixed assets on the company’s balance sheet. Use this

Excel template

to assist you in your calculations.

Analysis:

Once you have calculated depreciation expense and the fixed-asset turnover ratio, you can analyze the results to answer questions such as:

• Which depreciation method does the company use for each class of fixed assets?
• How much depreciation expense did the company incur in the most recent year?
• How efficient is the company at using its fixed assets to generate sales?
• Has the company’s fixed-asset turnover ratio changed over time?

Criteria for Success

In your written executive summary, you can also compare the company’s depreciation expense and fixed-asset turnover ratio to those of its peers in the same industry. This can help you to identify any potential areas for improvement.