Property, plant, and equipment (PP&E) are physical, tangible assets that are vital to business operations of a company. This includes any type of asset that is used in the operation of a business and is expected to benefit the company for more than one year, such as buildings, vehicles, furniture, land, computers, machinery, and tools. The purpose of PP&E is to provide long-term benefits to the company, as opposed to short-term, liquid assets such as accounts receivable, money of hand, or investments.

The PP&E of a company provides evidence of the long-term commitment that management has towards the financial health of the company. Analysts use the PP&E assets to measure the long-term effectiveness of a company in utilizing its funds. The PP&E value helps determine the financial strength of a company.

The purchase of PP&E assets is used as an indicator by investors that management is confident in the outlook and financial health of the business. Thus, it is important to review the PP&E assets of a company to determine if the funds are being used in an efficient manner. Companies must properly evaluate and select the appropriate PP&E in order to ensure that the asset matches the company requirement and is in line with the company’s projected growth.

In addition, the PP&E assets are depreciated over time, so a company must recognize the cost of replacement or repairs on a regular basis. Companies are required to regularly review its PP&E assets and assess their condition, value, and other costs associated with ownership in order to maintain accurate records.

All in all, Property, plant, and equipment (PP&E) are long-term physical assets that are essential to business operations and the financial health of a company. PP&E assets must not only be valuable to the company, but must also have a reasonable estimate of their useful economic lives. Companies need to actively manage their PP&E assets in order to ensure their long-term viability.