The business plant and equipment is a business asset that generally ‘wears out close ‘in doing its work for the business. Plant and equipment usually represents some of the capital invested in a business. As it ‘wears out’, that capital is ‘consumed’. Its working life can be extended with good care and maintenance. But, eventually, it wears out and needs replacing.
There is capital costs to replacing it. Businesses with poorly maintained, or poorly performing, or under capacity, or technically obsolete plant and equipment doesn’t engender confidence about the future profitability of the business. Often, the need to repair or replace plant and equipment can add to the costs of a business and reduce its profitability.
Risks can be limited by a sound repair and replacement policy that is implemented in a timely manner. Keeping abreast of technology and the costs of production, particularly skills and labour costs associated with operating plant and equipment can add to the reliability of future business profits.
