Definition
Gross Block and Net Block
Gross block is the total original cost of a company's fixed assets, while net block is gross block less accumulated depreciation.
On the balance sheet, gross block shows the historical cost of all property, plant and equipment, and net block shows their depreciated carrying value. The gap between them, accumulated depreciation, indicates how old or used the asset base is.
A net block that is small relative to gross block suggests heavily depreciated, ageing assets that may soon need replacement capex. Comparing the two over time, alongside capital work in progress, helps analysts gauge the age and renewal needs of a company's asset base.
Related terms
- Capital Expenditure (Capex)Capex is the money a company spends on acquiring or upgrading long-term assets like plants, machinery, and equipment to grow or maintain operations.
- Balance Sheet (Financial Statement)The balance sheet is a financial statement showing a company's assets, liabilities and shareholders' equity at a point in time, reflecting what it owns and owes.
- DepreciationDepreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life, reflecting wear and obsolescence as an expense.
- Capital Work in Progress (CWIP)Capital Work in Progress is the cost of fixed assets under construction or not yet ready for use, recorded on the balance sheet before being capitalised.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.