Introduction
Non-Current Assets are assets that will NOT be converted into cash in the next 12 months: Property Plant & Equipment (PPE), LP investments, goodwill, intangibles.
Explanation
Non-Current Assets include: 1) Net PPE (buildings, equipment, land less depreciation), 2) LP Investments, 3) Goodwill & Intangibles, 4) Deferred Tax Assets non-current. They are long-term productive assets.
Formula
Total Non-Current Assets = Net PPE + LP Investments + Goodwill + Intangibles + Others
Example
Manufacturing vs Software: - Auto Manufacturing: Non-Current Assets 70% of total (factories, equipment) - SaaS Software: Non-Current Assets 30% of total (mostly goodwill from acquisitions)
How to read it
High Non-Current Assets as a % of total are typical of capital-intensive industries: manufacturing, utilities, real estate. Low Non-Current Assets are typical of asset-light businesses: software, professional services, retail. Companies with high Non-Current Assets have high CapEx (they need to replace equipment). Red flag: Non-Current Assets growing but flat income = unproductive investments.
Key takeaways
- Non-Current Assets = illiquid LP assets
- Includes: PPE, LP investments, goodwill
- High in capital-intensive industries
- Low asset-light (software)
- High implies high CapEx required
- Growing without revenue growth = red flag