Capex and depreciation (PP&E roll-forward)
Opening, plus capex, less depreciation, closing.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: capex and depreciation (pp&e roll-forward).Updated 30 September 2026
Part of m&a and private equity models, with the models, labs and guides around it.
Part of healthcare financial models, with the models, labs and guides around it.
What it does
A roll-forward: opening net PP&E, plus capital expenditure, less depreciation, equals closing. Capex is usually a share of revenue; depreciation is a rate on the opening balance, or a vintage-by-vintage waterfall in a fuller model. Closing PP&E goes to the balance sheet, capex to investing cash flow, depreciation to the income statement and back in the cash flow.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 29–30: Capital expenditure, % of revenue, Depreciation, % of opening net PP&E
- Cash Flow, rows 12–13: Capital expenditure, Cash from investing
- PP&E, rows 6–11: Opening net PP&E, Capital expenditure, Depreciation, Closing net PP&E…
- Assumptions, rows 9–10: Depreciation and amortisation, % of revenue, Capital expenditure, % of revenue
- Forecast, row 9: Depreciation and amortisation
- Forecast, row 16: Less capital expenditure
- Assumptions, rows 37–38: Depreciation and amortisation, % of revenue, Capital expenditure, % of revenue
- Operating Model, row 10: Depreciation and amortisation
- Operating Model, row 22: Less capital expenditure
- P&L, row 9: Depreciation of leased systems
- Cash Flow, rows 6–8: Operating profit after tax, Add: depreciation of leased systems, Less: capitalised leased systems
- Cash Flow, rows 11–12: Free cash flow, Free cash flow conversion
What a reviewer looks for
- Depreciation charged on the closing balance, which is circular with capex in the same year.
- A capex line on the cash flow statement that does not equal the one in the roll-forward.
- Forgetting that depreciation added back in the cash flow has to be the same figure that was deducted.
Learn it, then build it
Build · Lab · ~10 min
Depreciation Waterfall
Forecast depreciation from a capex plan rather than a ratio, read a capex-to-depreciation multiple, and say which part of the spend is buying growth and which is only standing still.
Read · Guide · 13 min
How to Build a Three-Statement Model That Actually Balances
Vocabulary: The Three Financial Statements.