There are three key areas in understanding the risks associated with a companys equipment:
1. Age. How old is the equipment and does the output from the equipment still meet good quality standards. In essence, is the equipment obsolete?
2. Repairs. Is the equipment susceptible to breakdowns and big repair and maintenance bills?
3. Productivity. Is the equipment still meeting efficient production standards?
One important CFO Service is to assess the risk associated with equipment. The cost to purchase equipment or a lease to acquire equipment is a major capital expense and an untimely purchase of equipment can cause cash flow problems. The CFO must perform an analysis on equipment performance for both quality of output and for production efficiencies. In addition an analysis of the repair and maintenance costs of the equipment must be made. Once these analyses are complete a comparison can be made as to what the monthly carrying costs of the equipment are and what the cash availability of the company is versus the repair costs, quality and production standards. Then the risk of the equipment can then be assessed as to whether or not to buy or lease new replacement or upgraded equipment.
