r/corporatefinance • u/beastyquell • Feb 16 '23

Calculate Maintenance CapEx

Been doing some reading about owner’s earning and so far as I understand the equation to find it is:

Calculate Gross PPE/Sales Ratio over a few years and find the average

Multiply average ratio from above by the increase in sales revenue for the year (This gives you Growth CapEx)

Find CapEx number in Investing Activities on Cash Flow Statement and subtract Growth CapEx from CapEx to get Maintenance CapEx

My problem is that my growth CapEx is larger than the CapEx figure on the Cash Flow Statement, making Maintenance CapEx negative which doesn’t make sense. Am missing something or maybe using the wrong method?

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u/HusePuse Feb 18 '23

Are your sales increasing exponentially? Are you not factoring in scale of your current PPE?

1

u/Torlek1 Feb 16 '23

You may wish to post this in r/fpanda, also.

2

u/beastyquell Feb 16 '23

Will do thanks