An asset is a valuable resource that you own, such as money, property, equipment, or investments.
It is something that a person or a company owns that has value and can be used to generate income or provide future economic benefits. Assets can be divided into two primary categories:
π Current Assets
These assets can be converted into cash within a short period of time, typically one year or less.
π Cash, accounts receivable, inventory, and short-term investments.
π’ Examples
- Cash: This is money a company has in the bank.
Apple has $200 billion in cash as a current asset.
- Accounts receivable: This is money owed to a company by its customers.
Nike has $5.6 billion in accounts receivable as a current asset.
- Inventory: This can be goods or products that a business has in stock and is ready to sell or use.
Tesla has $22 billion in inventory as a current asset.
πLong-term Assets
These assets are expected to provide value over a longer period of time, typically more than one year.
π Property, plant, & equipment, vehicles, furniture, investments and intangibles.
π’ Examples
- Property, Plant, & Equipment (PP&E): The value of tangible assets a company owns like buildings and machines.
Coca-Cola owns office buildings with a total value of $1 million.
- Vehicles: These are automobiles or transportation equipment owned by a company.
Ford owns a fleet of vehicles, with a total value of $100 million as a long-term asset.
- Furniture: These are movable items such as desks, chairs, tables, cabinets, and other furnishings used in offices, stores, or other business premises.
Google has $1 million worth of furniture as a long-term asset.
- Investments: Item of value with the goal of generating income.
Spotify has $128 billion in investments as a long-term asset.
- Intangibles: These are non-physical assets without a physical presence, such as patents, copyrights, or goodwill.
Microsoft holds $30 billion worth of software patents of intangible, long-term asset.
Assets can also be further categorized based on other factors such as whether they are tangible or intangible.
Tangible assets are physical assets that can be touched, seen, and measured.
π Real estate, vehicle, equipment, cash, inventory.
Intangible assets are non-physical assets that cannot be touched or seen.
π Patents, copyrights, trademarks, intellectual property, goodwill.
By understanding the different types of assets, including tangible and intangible assets, individuals and companies can make informed decisions about managing their assets and achieving their financial goals.