What is an asset?
Assets are resources with economic value that are owned or controlled with the purpose of generating benefits.
– cash or cash equivalents (such as bonds, certificates of deposit, treasury bills, checking accounts, saving accounts)
– real property (land and/or buildings/structures)
– personal property (anything owned that is not real property)
– investments (annuities, mutual funds, insurance policies)
What types of assets are there?
The various types of assets can be categorized as liquid and illiquid, based on the possibility of turning the asset into cash or they can be categorized by their nature, such as: current, fixed, financial, intangible, etc.
What are liquid vs. illiquid assets?
Liquidity refers to immediate availability/usability–cash is considered the most liquid asset, while other assets are liquid if they can be converted to cash immediately and with little effort.
Examples: deposits that have passed the maturity date, shares of stock, bonds, commodities.
Therefore, illiquid assets are those that take longer to sell, either for their high value or for any restrictions that may apply specifically to their sale. An asset may also become illiquid due to deterioration.
Examples: collectibles like art, stamps and coins may take longer to sell, as collectible markets tend to be small and very specific.
What are current assets?
Current assets are short-term resources, which are expected to be converted into cash within 12 months. Examples: cash equivalents, inventory, prepaid expenses.
What are fixed assets?
Fixed assets are long-term resources, which generate returns over time. These assets are subject to depreciation, an adjustment for aging of the fixed assets, which does not necessarily mean that the asset loses earning power. Examples: equipment, buildings.
What are financial assets?
Financial assets are investments made in the assets held by other entities. Examples: stocks, corporate bonds.
What are intangible assets?
Intangible assets are economic resources like trademarks, patents, copyright. They can generate returns, but have no physical presence.
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