What Is an Asset?
Updated June 24, 2022
An asset is something you own that has monetary value. There are many different types of assets, both business and personal, and understanding all of the assets you own can help you determine your wealth. In this article, we discuss the different types of business and personal assets.
Business and personal assets
A business asset is a resource that a company owns as a result of a transaction and that it plans to use to generate cash flow, improve sales or reduce expenses. Personal assets are valuable resources that an individual owns and that also generate more wealth for that person. Examples of assets are buildings, land, equipment, furniture, inventory, accounts receivable, vehicles, temporary and long-term investments and cash.
What is a business asset?
Business assets are a company's resources. Assets owned by a company have economic value, facilitate daily operations and determine the monetary value of the company. Assets can be presented as tangible or intangible and are classified according to their value and assumed lifespan.
Business assets include cash or cash equivalents, land and buildings, investments and receivables. An asset, regardless of what form it takes, can represent cash value, generate future cash flows, reduce expenses or improve operations.
Businesses usually consider two main types of assets:
###Short-term or current assets
These are used to facilitate day-to-day operations and can be converted into cash within one operating year. Some of the most common examples of a business's current assets include:
Cash and cash equivalents: Cash and its equivalents can include any liquid assets that can be immediately accessed to pay for new resources, repay debts or pay out dividends to shareholders.
Accounts receivable: Receivables are outstanding payments expected from customers. When customers are allowed to purchase goods or services on credit, they agree to payment terms, including how long they can take to pay and how much interest will be calculated.
Temporary investments: Investments that can and will be converted to cash within the fiscal year.
Inventories: Inventory includes finished goods and merchandise that a company plans to sell, whether it's manufactured by the company or purchased from a supplier, as well as raw materials used for manufacturing finished goods.
Certificates of deposit: Sometimes referred to as 'time deposits,' certificates of deposit, or CDs, are similar to a savings account in that an initial deposit is made and is as good as cash. CDs, however, earn interest and cannot be withdrawn without penalty before the maturity date. CDs can be purchased in different time increments, including three-month, six-month, one-year and five-year.
Capital stock (or stockholder's equity): Capital stock is stock in the company, the shares of which are purchased with investment capital. If a company needs immediate cash, it can often sell some capital stock to raise funds, but must be careful not to sell more than its corporate charter allows lest the value of the company's stock becomes diluted.
Fixed or long-term assets
These assets are considered long-term when there is more than one year before conversion to cash and they’re used in producing goods and services. Examples of fixed assets include:
Company-owned vehicles: This encompasses any car purchased by the company for company usage. This can include cars, delivery trucks, fleet vans and other street-legal vehicles owned by the company for business-related uses. These vehicles are considered long-term assets because of their usable life.
Land and buildings: Any facilities, manufacturing plants, parking garages, offices or other structures owned by a company, and any land the company owns. Buildings have a usable life for several years, or even decades and thus are considered long-term fixed assets subject to depreciation, while land is assumed to have an unlimited useful life and does not depreciate.
Equipment: Machinery, computers or other devices necessary for daily operations that are owned by the company. Sometimes vehicles are included in the equipment category.
Furniture: Sometimes referred to as FF&A, this includes furniture, fixtures, supplies and accessories. Office furniture, lighting, wiring (belonging to the company), filing cabinets and other necessary components used in day-to-day operations that the company has purchased. These items depreciate.
Some assets don't easily fit into the current or long-term categories due to their intangible nature. These assets include:
Financial assets: This class of assets is commonly composed of a company's investments, such as stocks, preferred equity, corporate bonds and other securities, and are valued based on the individual categorization of the asset.
Intangible assets: Intangible assets provide economic value but have no physical presence. Intangible resources, like a license or a patent, can also be assets. Other examples include trademarks and copyrights. Intangible assets are considered the intellectual property of a company, and the company can use them to generate revenue over time.
Related: A Complete Guide To Hard Assets
What are personal assets?
Whereas companies own business assets, individuals own personal assets. These are items of value against which an individual measures his or her wealth. To calculate your personal net worth, you would subtract everything that you owe (your liabilities) from everything that you own (your personal assets). If your personal assets are more than your liabilities, you have a positive net worth. Personal assets, such as business assets, can also be either tangible or intangible.
Related: Asset Manager Jobs
Examples of tangible personal assets
The following would be considered tangible assets:
Real estate and houses
Cars, boats, planes, bicycles and motorbikes
Furniture and antiques
Art collections, sculptures and other decorative ornaments
Computers, laptops and printers
Examples of intangible personal assets
The following would be considered intangible assets:
Stocks and bonds
Life insurance policies
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