Understanding fixed assets
A fixed asset represents a long-term asset utilized by a company in its operations. Upon purchase, the company records the fixed asset on its balance sheet and gradually depreciates it throughout its useful life.
Grasping fixed asset's tangible book value
The tangible book value of a fixed asset denotes the net saleable amount after deducting associated liabilities and considers asset depreciation. It's instrumental in assessing a company's fixed assets and evaluating its financial well-being.
Exploring fixed asset's intangible book value
Fixed assets, which aren't intended for sale and form part of a company's operations, can include intangible elements beyond the physical asset itself, such as the value of a company's name or trademark. This value is usually determined by an appraiser and contributes to the fixed asset's total cost.
Distinguishing tangible book value from intangible book value
Tangible book value measures the physical assets of a company that can be touched, while intangible book value encompasses assets like trademarks and copyrights, which are non-physical and often challenging to quantify.
Illustrating a fixed asset in practice
Fixed assets are vital for a company's operations, serving long-term purposes and not intended for sale. Examples include land, buildings, and equipment, all recorded on the balance sheet at cost, less any accumulated depreciation.