There are three key areas in understanding the risks associated with a company's equipment:

• Age: Is the equipment obsolete?
• Repairs: Is the equipment susceptible to breakdowns and big repair and maintenance bills?
• Productivity: Is the equipment still meeting efficient production standards?

One of the most important things I do for clients is assessing the risk associated with equipment. The cost to purchase equipment or a lease to acquire equipment is a major capital expenditure 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 the monthly carrying costs of the equipment and  the cash availability of the company versus the repair costs, quality, and production standards.  After that, the risk of the equipment can then be assessed as to potentially buying or leasing new replacement or upgraded equipment.