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Tangible assets definition

Tangible assets meaning

Tangible assets have an absolute value for which they can be sold or liquidated. They can be short-term or long-term based on their degree of liquidity and usability. Tangible assets are the physical assets owned by a company.

Companies use these assets in their daily operations and in the process of generating profit. They can be found on the balance sheet statement. Tangible assets differ in terms of how easy their value can be converted into cash. Cash equivalents have higher liquidity compared to some property.

What are tangible assets?

Tangible assets can be current or fixed.

Current assets: accounts receivable, cash, cash equivalents and inventory.

Fixed assets: property, plant, equipment, machinery, etc.

Fixed assets are considered to be long-term assets. Their value can depreciate over time, as an asset value can decrease because it is used in daily operations. The accumulated depreciation on these assets is also recorded on the financial statements.

There are two types of companies according to the level of real assets employed: a capital-intensive company (or industry) and a non-capital-intensive, or labour-intensive, one. A capital-intensive industry is where businesses have a high level of tangible assets (such as plants, machinery and equipment), such as in the transportation or construction industry.

These assets could also serve as a guarantee to creditors. Companies can use fixed assets as security against loans issued to the company. If the company doesn't pay its obligations on time, the creditor can take possession of the assets and sell them to cover the loan.

Tangible vs intangible assets

Tangible assets can be found in material form, while intangible assets are not physical. Intangible assets are patents owned by the company, trademarks and goodwill. They are not directly used in the production of products and services.

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