productive asset investment ratio investment & finance definition

Capital expenditures divided by depreciation expense. This ratio is used to measure a company’s willingness to maintain its current level of investment in capital assets. Investors watch the ratio because if PAIR decreases, the company may find that its outdated equipment affects its future ability to successfully compete. Companies with a ratio over 1.0 have higher quality earnings because they aren’t delaying capital expenditures in order to boost their earnings. Such a delay may reduce future earnings as companies struggle to make capital expenditures to catch up with their competitors.