Investing term
What is Property, plant & equipment (PP&E)?
Long-lived physical assets — buildings, machinery, vehicles — sitting on the balance sheet at cost minus accumulated depreciation.
Property, plant and equipment (PP&E) is a company's long-lived physical assets — buildings, machinery, vehicles, land — carried on the balance sheet at cost minus accumulated depreciation. It represents the tangible productive base a business uses to make its products or deliver its services.
PP&E shows how capital-intensive a business is. Heavy PP&E — factories, utilities, railways — means large ongoing spending just to maintain and eventually replace those assets, which weighs on free cash flow. Asset-light businesses, like software or services, carry little PP&E and can grow with far less reinvestment. The 'net' figure on the balance sheet is cost less the depreciation charged over the years, so it reflects both what was spent and how much of the assets' useful life has been used up.
Property, plant & equipment is a company's long-lived physical assets, at cost minus depreciation. Heavy PP&E means a capital-intensive business that must keep spending just to keep running.
For example
A manufacturer carries $2B of property, plant and equipment — factories and machinery at cost minus accumulated depreciation — reflecting how capital-intensive it is.
Learn it by doing
That's Property, plant & equipment (PP&E) in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 14, Reading Financial Statements).
Try the free lesson →Why it matters to you
PP&E matters because it reveals the fundamental economics of a business — whether it's capital-intensive, needing constant heavy spending just to keep running, or asset-light and able to grow cheaply. Capital-intensive companies must pour cash into maintaining and replacing PP&E, which limits free cash flow, while asset-light ones convert more profit into distributable cash. Reading PP&E alongside depreciation and CapEx tells you how much of a company's cash the physical business consumes.
⚠ Underestimating the cash a heavy asset base demands
A large PP&E base isn't just value on the balance sheet — it's a standing commitment to spend, since those assets wear out and must be maintained and replaced with real cash. Capital-intensive businesses can look profitable while much of their cash is consumed keeping the asset base running. Overlooking that ongoing demand overstates how much cash is truly free.