When you are running a manufacturing company, you have two assets in your hands – the manpower and the equipment. To ensure that your business is moving forward as planned to need to take into account these assets and ensure that you are getting the most out of these resources. One way to know if you are is to do a plant and equipment valuation and appraisal.
Some business owners think that they do not to do one. If you are hesitant to get an appraisal, these reasons might change your mind:
- Determine the profitability of the business base on the equipment
This is essential, especially for manufacturing businesses who are relying to machines for production. Before purchasing the equipment, they would need to compute if the cost of purchasing the machine would offset its profitability. In case of plant equipment, they need to factors its longevity, output, and maintenance cost. This is also applicable for buying second hand equipment and manufacturing machines.
- Determine the condition of the equipment
Equipment appraisal is needed to know the true condition of the equipment and if it is up for replacement. All manufacturing equipment goes through a depreciation and deterioration phases. Once the equipment reached its peak, the business owners would need to know if the equipment is still good for use or an equipment replacement is in order. Apart from the condition of the equipment, you also need to check other factors such as the depreciation value.
- Determine the selling price of the equipment
Manufacturing companies often sell their equipment to other companies. To put a price on a machine, business owners would need to appraise the equipment and determine the estimated price value based on age, depreciation value, and current condition. This is prevent overpricing or undervaluing the equipment for sale.
- Can help with your tax assessment
Some jurisdiction require companies to appraise their assets so they can estimate the actual value of the equipment versus the appraised value. The appraisal report can help give the close to accurate numbers that is needed for filing company taxes and possibly reducing the amount of taxes that the company has to pay.
- Help resolve legal issues
Appraisals can also help with the legal side of business, for instance, filing for bankruptcy. To be able to get an approval, the company would need to submit an actual value of their assets, from physical to liquid assets. Appraising your properties and equipment is part of the process.
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