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What Are The Different Types Of Business Assets A Company Can Hold?

business assets

A company can hold a variety of assets; current assets, non current assets, physical assets, intangible assets, operating assets and non-operating assets.

Current Assets

  • Cash, accounts receivable, inventory
  • Can be converted to cash within one year

Non-Current Assets

  • Property, equipment, investments in other companies
  • Cannot be converted to cash within one year

Physical Assets

  • Buildings, vehicles, equipment
  • Tangible assets with physical form

Intangible Assets

  • Trademarks, copyrights, licences
  • Non-physical assets

Operating Assets

  • Cash, inventory, machinery used to generate income

Non-Operating Assets

  • Stocks, bonds
  • Not used for operations, provide liquidity

Every business relies on a wide range of assets to go about its daily activities. Assets fuel operations, drive growth and safeguard financial futures and can include cash reserves to physical equipment.

Understanding the types of assets there are and how they aid business operations is key for all business owners that want to thrive.

Here, we will talk about the important things about business assets. We will look into the types of assets for your business,how to list them on a balance sheet and how to best use assets to their potential.

What are Business Assets?

A business asset is, broadly speaking, something that carries value and can be used for generating business income. Assets in a business include cash on hand and in banks, company shares, raw materials and inventory.

Business assets are valuable resources that can aid the future economic health of the organisation and properly managing the assets available is key for the financial health of any business.

What are the Different Types of Business Assets?

Among the different types of business assets, the common ones are current and noncurrent assets, physical and intangible assets and operating and non-operating assets. Some assets can be multi-type business assets so it’s essential to have a good understanding of each type.

Current Assets

Current assets are convertible to cash in one year or less. Businesses use current assets for day-to-day operational expenses. Cash in the bank, inventories and accounts receivable are current assets.

It’s important for businesses to hold current assets as they help cover daily business expenses when you need to quickly come up with cash particularly in emergency situations. Some businesses fall into deep financial troubles because they are unable to pay sudden expenses or bills that become due.

Current assets are otherwise called liquid assets because you can sell them quickly for cash when a need arises. Businesses can do this but often with some losses since their selling price may be of lesser value. It is not recommended for businesses to hold a large proportion of current assets. 20% or less is your target because you’d also want to have long term investments in your business asset portfolio.

Current assets are reflected on the balance sheet as they indicate the performance of a business financially.

Non-Current Assets

Non-current assets are not convertible to cash within a year or less. As such, they often fund long-term business operations. Examples of non-current assets are property, company shares and equipment.

It’s important for a business to hold non-current assets as these are essential to the long-term growth of the business.Non-current assets produce a stable income stream. They have more value than the current assets of the business.

Non-current assets must be reflected on the balance sheet per type and their value. Typically, these must be more than half of your business portfolio as it is highly important for a business to have long-term investments.

Physical Assets

Physical assets are visible – you can hold and touch them. Examples would be vehicles, buildings, equipment and other physical properties that your business owns. These are important to have since they tend to have long life spans and a lot of them increase in value over time.

You should record physical assets on your balance sheet according to type and value. Physical assets also fall other non-current assets a lot of times because they are long-term assets that do not require to be replaced so soon.

Due to their increasing or enduring values, it is recommended to have a large percentage of physical assets in your business asset portfolio.

Intangible Assets

Intangible assets are not physical properties or assets that you can touch, hold or see. Examples would be copyrights, trademarks and licences that hold great value for your business.

Intangible assets hold value over a long period of time and can be a steady source of income for years. It is recommended for businesses to hold a large portion of intangible assets in their portfolio as these maintain value better than other asset types. Businesses must register intangible assets correctly and promptly to ensure that they maintain ownership of these assets.

In recording all intangible assets on the company balance sheet, make sure to include all costs and properly state values and state them correctly. In the case of software,for instance, they have a purchase cost plus continuing costs so those additional costs must be added to the value and recorded accordingly on the balance sheet.

Operating Assets

Operating assets are ones that you use in the operation of your business. These are income generating assets. For example, inventory, cash and accounts receivable are operating assets. Certain industries have their own specific operating assets, for example, machinery, office e equipment and tools.

Operating assets are like safety nets that sit between your current assets and current liabilities. While current assets are the cash you hold, current liabilities are the liabilities or financial obligations you hold.

Record operating assets on your company balance sheet according to type and value. They are essential to your business and must take up a large proportion of your total business asset portfolio.

Non-Operating Assets

Non-operating assets are not utilised in the operation of your business but they are income generating assets. Examples would be stocks in other companies and bonds. It’s important to hold non-operating assets as they enable liquidity when you have no incoming cash, particularly, when customers have bought products but have not yet sent payment for their purchases.

Often, non-operating assets also fall under short term assets. This is because they often need replacements at a sooner time frame. Hence, businesses must keep tabs on their non-operating assets since there is a risk of income loss when these lose value, function or stop generating income.

Include all non-operating assets on a balance sheet according to their full value (all costs summed).For instance, bonds have a purchase cost and often have ongoing costs which must be added to their value when being recorded on a balance sheet.

Valuing Your Assets

Asset value depends on the type and means of purchase. Current assets are valued net of depreciation costs so you need to subtract the cost of depreciation from purchase cost. Operating and non-operating assets are the same way. However, there are varying methods of calculating values per kind of asset as certain rules may apply on a particular asset type.

You also need to remember that asset value changes over time, so you must be aware of current asset values on a regular basis. This certainly applies to intangible assets such as copyrights and trademarks which can lose value in some situations.

Using an Appraiser

Appraisers are able to give an accurate and detailed valuation of your assets so it is wise to get professional services to get a trustworthy report on your asset values.

Choose an appraiser that is reputable and trusted in your industry or the area of assets that are being valued. It’s advisable to get references from other businesses as they can tell you from experience if they are happy with the service rendered by a particular appraiser. It is important for the appraiser to be knowledgeable on the particular type of industry which your business belongs to.

Always ask for the cost of appraisal upfront and know how they charge fees. Some charge per asset being valued while others may charge you per group or total number of assets to be appraised. Know the costs beforehand.

Accounting Software

If your business has a large number of assets, consider purchasing accounting software for tracking cost, values and expenses. This specialised application keeps your asset values up-to-date. Using accounting software enables you to keep tabs on all your assets and this is very advantageous if you plan to add more assets on a regular basis.

You have a lot of accounting software packages available to choose from, but key features to have are:

  • Report generation on asset values over time, inclusive of amortisations, interests and depreciations.
  • Tracking for changes to values of assets when you purchase one or sell another. This is useful for tax computations.
  • Straightforward and simple interface. You’d want to use something that’s easy to learn and simple to use as you track assets and update values whenever necessary.

How to Maximise the Potential of Your Assets

You can certainly maximise the income-generating potential of your assets. The following are some ways to help you:

  • Get a full understanding of how each asset functions and their benefits so you can use them to your best advantage.
  • Track all expenses on top of total purchase costs per asset so you can stay aware of how much each asset is really costing you.
  • Monitor valuation changes per asset. Some decrease in value over time and you may be better off selling them. Tax implications may also apply where necessary.
  • Record every asset and monitor when there is a need for upgrades or total replacements. Note depreciation costs as there are tax implications involved in those situations. Also keep tabs on how much income these assets are generating over time so you can properly assess their overall values.

Which Assets are Best for Which Industries?

Different assets suit different industries. You must know which are most suited to your business as not every asset will be beneficial for your business.

  • Manufacturing and construction businesses would do well to invest in physical assets such as land and machinery. These types of assets are useful as an operational and long-term asset.
  • Retail businesses would do well to hold intangible assets such as copyrights, patents and trademarks. These types of assets add protection to your brand and will generate income for you when it’s time to sell them.
  • Technology-related businesses would do well to invest in intangible and operating assets such as licences and other software. These are essential to the operation of the business.
  • If your business is in the service industry, consider investing in non-operating assets. Stocks and bonds prove to be valuable as a source of funds whenever the business needs funding.

Final Thoughts

To understand and navigate business assets you need to know your company’s needs and goals. The value of business assets not only lies within their individual worth, but the way they work with your business and its vision.

Business assets are valuable possessions and resources available to a company that help to power its operations, revenue growth and financial position. Assets are the building blocks on which companies are built and can shape the direction of growth.

From liquid cash reserves to physical premises and equipment, these assets aid the day-to-day activities whereas intangible assets like intellectual property and brand equity can help to safeguard a company’s future in the marketplace.

Finally, equity holdings and bonds are types of assets that can protect the business from market volatility.

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