Oct 07, 2022
There are two kinds of assets: the ones you can see and those you can't. Most of the things a company owns that can be seen or touched are its tangible assets, like computer equipment. Tangible assets are the primary type of assets that companies use to make their products and services. Even though intangible assets don't have a physical form, they still have a monetary value because they can bring in money. One example of an intangible asset is the right to use a song. The record company that owns the rights to the song would get a royalty payment every time it was played. Intangible assets include patents, copyrights, and a company's brand. There are many kinds of assets, some of which are good for a short time and others for a long time.
Tangible assets are things that can be seen, touched, and measured by a business. "Tangible assets" are things you can see, touch, and handle. The most important part of a business is its tangible assets, which are used to make goods and services. Because they are physical, things that happen naturally can damage tangible assets.
Current assets include cash, inventory, and securities that can be sold. Most people use these items within a year, so it's easier to sell them to get some money in an emergency.
Fixed assets are things that a company uses to run its business for more than a year. On the balance sheet, these things are called "PP&E (Property, Plant, and Equipment)." Items like buildings, trucks, office furniture, machinery, and so on are among them. On the income statement, the money a company makes from its physical assets is called revenue. Without fixed assets, the business can't stay in business.
There are many different kinds of businesses that have a lot of physical assets.
Companies that make things, like the steel and car industries, have assets that can be seen and touched. The computers, factory equipment, and buildings could be seen and touched.
Tech companies that make phones, computers, and other electronic devices use physical assets to make their products.
There are also a lot of fixed assets that companies own in the oil and gas business. For example, oil companies own oil rigs and other equipment used for drilling. To buy their assets, oil companies need a lot of money or capital.
Intangible assets are usually long-lasting things that can't be seen or touched. Intangible assets are often intellectual, and it's hard to give them value because it's hard to know how much they'll be worth in the future. Intangible assets can't be seen or touched, but they add to a company's future value or worth and can be worth much more than tangible assets.
A brand is a symbol, logo, or name that a company uses to make its products stand out from its competitors. Brand equity is an intangible asset because you can't see or touch the value of a brand. Instead, how people feel about a brand is what determines its value. The value of a company's brands affects the value of the company's assets as a whole.
A lot of "intangible assets" are owned by companies in many different fields. Here are just a few:
For tech companies, especially computer companies, intangible assets are significant. Copyrights, patents, key employees, and research and development are all examples of these. Most of the time, Apple Inc. (AAPL) has things that can't be seen or touched.
Entertainment and media companies have things like publishing rights and key talent that can't be seen or touched. In the music business, for instance, all of an artist's songwriting rights are intangible assets. People can also know the names of musicians and singers. The music production company might own the rights to the songs, which means that every time a song is played or sold, the company makes money.
Companies that sell consumer goods and services in markets with a lot of competition need intangible assets like patents on formulas and recipes and brand name recognition. An excellent example of an intangible asset is the KO (Coca-Cola Company). It's almost impossible to figure out how much its well-known brand name is worth, but it's a big part of how well Coca-Cola Company does and how much money it makes.
In the healthcare industry, it's common to have intangible assets like brand names, valuable employees, and research and development of new medicines and ways to care for people.
The auto industry also puts a lot of value on things like patented technologies and brand names. The name "Ferrari" is worth billions of dollars as a brand name.