Dr. Paul Borosky, DBA, MBA
Business Consultant & Author
Guide 14 of 34 · The Balance Sheet
What Is PP&E on a Balance Sheet? (Apple Example)
The buildings and machines. Not an expense, an asset.
Property, plant, and equipment is everything physical a company owns for the long haul: buildings, machinery, equipment. For a company that sells $416 billion of devices a year, Apple owns surprisingly little of it. That one fact tells you how Apple makes its products, and why so much of its cash ends up free.
Last Updated: 10/27/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Short Answer
What Is PP&E on a Balance Sheet?
Textbook Definition
Property, plant, and equipment (PP&E) are long-lived tangible assets used in operations, such as land, buildings, machinery, and equipment. They are usually reported net of accumulated depreciation.
In Plain English
PP&E is the stuff a company owns and uses for years: buildings, machines, computers, store fixtures. Buying it is not an expense. It is cash turning into a long-lasting asset, which wears down a little every year through depreciation.
Fixed Asset Turnover
Sales ÷ Net PP&E
Apple, fiscal 2025: 8.35
PP&E is the biggest physical asset on most balance sheets. The cash spent to buy it shows up as capital expenditures in the investing section of the cash flow statement.
Small Example First
Why Is Buying Equipment Not an Expense?
Start small. A coffee shop buys a $9,000 espresso machine with cash. Cash goes down $9,000. Equipment goes up $9,000. Nothing was lost. The money just changed form, from cash into a machine the shop still owns.
So the purchase lands on the balance sheet, not the income statement. The expense comes slowly, as the machine wears out. If it wears out $150 a month, that $150 is depreciation, recorded as an operating expense each month while the machine’s value on the balance sheet drops by the same amount.
Apple works exactly the same way, just with billions instead of thousands. That is why Apple’s 10-K labels this line property, plant and equipment, net: net of all the depreciation taken so far.
One Real Company
Apple’s PP&E, 2021 to 2025
PP&E grew every year. Sales grew too, just a little slower.
| Line | 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|---|
| Revenue | 416,161 | 391,035 | 383,285 | 394,328 | 365,817 |
| Net PP&E | 49,834 | 45,680 | 43,715 | 42,117 | 39,440 |
| PP&E growth | 9.1% | 4.5% | 3.8% | 6.8% | n/a |
| PP&E, % of sales | 12.0% | 11.7% | 11.4% | 10.7% | 10.8% |
| Fixed asset turnover | 8.35 | 8.56 | 8.77 | 9.36 | 9.28 |
| Depreciation expense | 11,698 | 11,445 | 11,419 | 11,104 | 11,284 |
Source: Apple Form 10-K filings as analyzed in the book. $ millions. PP&E as a percent of sales calculated from the book’s figures.
The Method
How to Read PP&E in 4 Steps
Read the five-year trend.
Rising PP&E means the company is building capacity. Apple’s rose from $39.4 billion to $49.8 billion.
Compare it to sales.
Divide PP&E by revenue. Apple’s moved from 10.8% to 12.0% of sales. Investment ran a little ahead of growth.
Run fixed asset turnover.
Sales divided by PP&E. Higher means more sales from the same buildings and machines. Apple’s slipped from 9.28 to 8.35.
Check capital spending.
PP&E grows through capital expenditures. Apple spends only about $9 billion to $13 billion a year, against operating cash flow above $100 billion.
What Asset-Light Means
Apple outsources most of its manufacturing. It does not own giant factories, so it does not have to pour cash into them. That keeps PP&E small and leaves far more cash for owners, which is a big reason Apple’s free cash flow is so enormous.
Compare It
Apple vs. Microsoft: Two Business Models in One Number
| Latest fiscal year | Apple | Microsoft |
|---|---|---|
| Sales per $1 of PP&E | over $8 | barely more than $1 |
| Capital spending trend | about $9B to $13B a year | exploding with data centers |
From the book’s Apple vs. Microsoft comparisons. Microsoft’s fiscal year ends in June.
Microsoft is in the middle of a historic building spree for its cloud and artificial-intelligence business. Its PP&E more than tripled in five years. Apple stays lean. Same industry, completely different appetite for capital. Neither is wrong, but they produce very different balance sheets.
Beginner Traps
What Do Beginners Get Wrong About PP&E?
- Treating an equipment purchase as an expense.
- Forgetting PP&E is shown net of depreciation.
- Assuming more PP&E is always better.
- Ignoring how much sales each dollar of PP&E produces.
- Comparing companies with different business models dollar for dollar.
- Missing that depreciation is a non-cash expense.
How the Book Grades Apple’s Fixed Assets
From the Book
Investing Ahead of Demand
Balance Sheet · PP&E
A Healthy Buildup
When a company increases its productive assets in step with, or a little ahead of, its sales, it usually means management is investing to support future demand rather than letting the business coast.
Every asset on Apple’s balance sheet, five years of numbers, and a grade for each.
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PP&E Questions
What is included in PP&E?
What does net PP&E mean?
Is PP&E a current asset?
Why is Apple’s PP&E so small compared to its sales?
Keep Going
Related Guides
PP&E connects the balance sheet to capital spending and efficiency ratios.
Written by Dr. Paul Borosky, DBA, MBA, business consultant, author, and adjunct finance instructor with an MBA focused in finance.
This page is for general educational purposes only. It is not investment, financial, tax, accounting, or legal advice, and nothing here is a recommendation to buy or sell any security. Apple and Microsoft figures come from their public filings as analyzed in the book. Apple and Microsoft are trademarks of their respective owners, and this page is not affiliated with or endorsed by either company.