Abstract: The capital expenditure is an important segment of capital investment with reference to fixed assets management and depreciation policy. The size of depreciation and method of depreciation adopted by factories influences its financial strength and adequacy to return on capital employed. The study tries to understand the size of depreciation with regard to gross block and depreciation to sales. it also tries to study the indices of gross block and depreciation in sample sugar factories and its impact on sales as well as return adequacy in sugar industry.