What is an Asset?

In layman terms, assets are items that are own by company or individuals that can provide future economic benefits. Let’s deep dive to know more about asset and its type.

Classification of Asset:

• Convertibility: Time taken to convert the asset to cash.
  1. Current: Assets that can be easily converted to cash. Like cash, receivables in short term.
  2. Fixed: Assets that can be readily converted to cash. Like land, machinery, trademarks.
• Physical Existence: Whether the asset is physical.
  1. Tangible: Assets that have physical existence. Like land, building, inventory.
  2. Intangible: Assets that don’t have physical existence. Like Goodwill, brand, trademarks.
• Usage: Business purpose of the asset.
  1. Operating: Assets that are required for day to day business transactions. Like cash, brand, inventory.
  2. Non-Operating: Assets that are not required for day to day business transactions but still can generate revenues in long term. Like vacant land, investments.

Now we know the different types of assets in financial world. Lets take a look into relationship world, where trust is the most important asset. Trust doesn’t have a price tag on it. It may be easier to gain but difficult to maintain in the long run.

Do you trust Maggi the same way you used to before it was ever banned? Do you trust the banks the same way after the scandal of Yes Bank?

Intangible asset forms an very important part of the companies success in the long run. However, Cash is always the king. The companies which don’t have cash in present situation will be shutting its door completely. We may see many company closing its units in coming days as the virus progresses.

An appreciating commodity always help as compounding makes it more valuable with the passage of time. Let it be wealth, health or relationship.

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Technologies company like Google, Facebook; mostly have intangible assets like databanks, software, patents. Whereas the manufacturing companies like Tata Motors, Relaxo ; have more of the tangible assets like land, buildings, equipment.