What the Heck is an Asset?

An asset is something owned by an individual, a group of individuals, or a company that can be sold or traded for cash or other tangibles. Cash are considered current assets, while equipment or other tangibles, such as real estate, are considered long-term assets. Assets that accrue from maintenance costs such as interest or rental fees, insurance, etc. are considered to be deferred assets since they are only tangible upon sale of a company or business. Deferred assets are usually tacked on to the selling price. Trademarks, reputation of a company or business, goodwill and even location are part of what is considered intangible assets.

An asset is what we own of value that can be sold or traded. If those items lose some of their value, then we will have to expect to lower the selling price.

The value of the combined assets are not enough to justify the value of a company. For example, a successful business with documented profit margins, well maintained and up to date operating equipment and growth potential is far more valuable than a company or business that has failed to keep up with demands and cannot show substantial profits or room for growth.

If rising operating expenses, insurance, lease payments, etc. are depleting profit margins for a company or business, these deferred assets may have so many liabilities attached that it no longer increases a company’s value.

The intangibles are often considered a company’s biggest asset. The reputation of the company, and the employees are at the heart of the greatness of any company, and without them, no company will be valuable.

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{ 2 comments… read them below or add one }

Mike August 28, 2009 at 1:38 am

B#llocks!

An asset is anything that puts cash in your pocket and leaves you cash positive – nothing else!

I.e. Your house is the bank’s asset unless you rent it out with a positive cash flow after expenses, where it thereby becomes….an asset!

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Investing School August 29, 2009 at 8:27 am

An asset doesn’t necessary generate income on a continual basis. Anything that theoretically can be sold is an asset. Even a car, which loses value over time is considered a depreciating asset.

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