Tangible Assets

What is Tangible Asset?

Tangible assets refer to those assets that can be touched and felt and are in physical form. Some of the popular examples are equipment, property, plan, etc. Such assets could be destroyed by natural disasters, etc.

The opposite of tangible assets is intangible assets that do not have a physical form. These assets are usually trademarks, patents, intellectual property, etc.

Tangible Assets Types

1. Current Assets

Current assets are also known as liquid assets and can be easily converted into cash. These assets are part of a business cycle for a short period of time generally for a year or even less than a year. The quality of current assets is greater than the fixed assets.

2. Fixed Assets

Fixed assets are also known as hard assets. They are part of a business cycle for a long time and cannot be easily converted into monetary form like cash. These assets are depreciated over a time period.

Tangible Assets List

1. Current Assets

• Cash and Equivalent
• Accounts Receivables
• Short-term investments
• Stock Inventory

2. Fixed Assets

• Building
• Equipment
• Machinery
• Furniture

Intangible Assets List

• Trademark
• Patent
• Goodwill
• Brand name and fame
• Business methods
• Copyright

Tangible Assets and Business

Tangible assets are a very vital part of a company's Capital structure. These are related to leverage.

1. Liquidity

Tangible current assets can easily be converted into cash since they provide liquidity to the business thereby reducing risk. If a business owns assets with value more than the liability, it's safe.

2. Depreciation

Depreciation in case of tangible assets is a non-cash expense. This means that the expense helps the company get a tax benefit. However, there is no outflow of cash from the business.

3. Security

Security or Collateral security is a term used by businesses when they use tangible assets as a means to obtain loans.

Net Tangible Assets

Net tangible assets refer to the difference between a company's Fair Market Value of tangible assets and the fair Market value of all liabilities. Here the liabilities show the outside liability of the company.

A company with high Net Asset Value has low risk in liquidity terms.