What Is A Tangible Asset?

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Assets are a vital part of any enterprise, may it be a start-up or a multimillion company. It holds a significant economic value that facilitates the continuous operations of your business. It increases a company’s value and helps in generating its income and revenue. Anybody can own an asset and can be tangible asset. After all, it is anything valuable that you own or lease, monetary or otherwise.

However, business assets are different from personal ones. Aside from amount differences, business resources have much higher stakes than individually owned resources. These can actually make or break your business. It dictates your relevance and survivability in an industry flooded by tycoons.

Business holdings are valuable items that your company benefits a lot. It includes cash, checks, raw materials, equipment, stocks, intellectual property, and brand reputation. Based on cash convertibility, a company’s property classifies as either current or fixed. Enterprises with high proportions of tangible holdings are those in the manufacturing, technology, oil and gas industries.

Current assets are resources that can easily be liquidated and stay in business for a short period. While a fixed or non-current holding is a long-term resource that is highly significant for an enterprise’s continuing operations, also, it cannot be easily converted into cash, unlike its counterpart.

Another classification depends on its basis of existence. It can be tangible—any physical or touchable material that has financial value to the business. Or intangible—a valuable resource that cannot be touched, such as company reputation and integrity.

 

What Is A Tangible Asset?

Tangible holdings come in physical forms such as cash checks, stock inventory, short-term investments, and marketable securities. It also includes property, plant, equipment, and any long-term investments. In other words, it is any physical material that helps the company generate cash flow through services or the production of goods.

Tangible resources are essential in the company’s capital structure. It is easier to collateralize and has a residual value—a specific amount of money when a tangible asset meets the end of its useful life. With that being said, it also means that tangibles are subjected to depreciation over time. You can opt to sell your capital resource before its time runs out. This way, you can counteract an expenditure with an inflow of cash.

How To Protect Your Tangible Assets?

Although both assets are valuable, tangible ones are the main form and measurement of worth for a company. They represent an enterprise’s net worth and income. Also, they can use tangible holdings as leverage or collateral for loans and financing. You can use this to continue your business’ operations or meet a set of goals or objectives.

As valuable physical property, tangibles face the risk of getting stolen, lost, or damaged. They are prone to a range of threats that can heavily affect your company. To protect your resources, you should:

Do a risk assessment and list every threat your holdings are facing.

Keep documentation that lists every form and type of assets you have.

Ensure that there is a recorded paper trail for every action any individual does, which involves your tangible properties.

Do a daily or weekly check of your stock, bond, equipment, and inventory.

Establish restriction of access to extremely valuable tangible properties such as stocks and inventories.

Heighten security measures such as CCTV installation and card-based room or file access.

Establish a contingency plan, as well as a good asset management system.

Tangible Property Valuation Methods

1. Appraisal Method

By hiring an appraiser, you get to know the actual market value and worth of every asset in your company’s balance sheet. They will assess the ongoing condition of your properties and holdings, its depreciation and degree of obsolescence.

2. Liquidation Method

This method allows you to determine the minimum value of your company’s liquidated resource during quick sales or liquidation processes. By hiring an assessor, you will get to know your business’ liquidation value based on a specific asset buyer’s perspective.

3. Replacement Cost Method

This method allows the determination of your resource’s value and worth for insurance purposes. This way, you can replace every tangible property with an average worth during accidents such as fire and natural disasters. Getting your assets insured also benefits you from other risks such as damages, loss, and break-ins.

If you have questions about how this applies to your business, feel free to get in touch with Annette & Co.!

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Annette Ferguson

Annette Ferguson

Owner of Annette & Co. - Chartered Accountants & Certifed Profit First Professionals. Helping Online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.

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