The Different Types of Assets, Explained by Professionals (with Examples)

Have you ever wondered why there are so many different types of assets, and how they all fit together on your balance sheet?

There are various types of assets used to calculate your individual net worth or the value of your company. Figuring out your financial health begins with a thorough understanding of these assets and how they play into your economic goals.

Below, our team at Capital Growth simplifies all the types of assets you need to know, and what they mean in the scope of your financial wellbeing.

What Are The Different Types of Financial Assets? (Examples Included)

Assets can be classified in three main ways: ease of convertibility into cash, physical presence, and frequency of use.

Financial Asset Types

By Convertibility

By Physical Existence

By Frequency of Use

Current vs. Fixed

Tangible vs. Intangible 

Operating vs. Non-Operating

Now, let’s dive into how assets are defined, the different categories of assets, and what they include.

What Is An Asset?

Simply put, an asset is any resource of value that can be turned into cash or future benefit. They contain economic value and can increase an individual’s net worth, or benefit a company by generating revenue.

A business or individual’s equity and solvency can be calculated by subtracting its liabilities from the value of its total assets. Using a balance sheet that shows current assets, liabilities, and stockholders’ equity, you can track and diagnose your overall financial health.

By Convertibility: Current vs. Fixed Assets

Assets classified based on its easy convertibility into cash are split into current and fixed assets.

Current Assets

Current or short-term assets are those that can be replaced or converted into cash within a normal operating cycle, which is typically less than a year.

Because they’re converted into cash in a short period of time, current assets do not need to be calculated for devaluation over time.

Current assets include:
  • Cash and cash equivalents (Certificates of deposit, treasury bills, bank drafts, short-term government bonds)
  • Marketable securities (Banker’s acceptances, commercial papers)
  • Inventory (Raw materials or goods available for sale)
  • Accounts receivables
  • Prepaid expenses

Fixed Assets

Also called non-current or long-term assets, fixed assets are not intended for sale within the year and therefore have lower cash convertibility than current assets. 

Unlike current assets, the value of your fixed assets can either appreciate or depreciate over time, affecting the solvency of an individual or company.

Fixed assets include:
  • Buildings
  • Land
  • Furniture
  • Vehicles
  • Machinery
  • Trademarks
  • Patents
  • Copyrights

By Physical Presence: Tangible vs. Intangible Assets

In addition to being classified according to convertibility, assets can also be categorized by their state of physical presence, as tangible or intangible.

Tangible Assets

Just as the word suggests, tangible assets are those that can be touched, seen, and felt. They are assets with physical onsite presence and can be either current or fixed.

Tangible current assets include:
  • Cash and cash equivalents
  • Marketable securities
  • Accounts receivables
Tangible fixed assets include:
  • Land
  • Buildings
  • Machinery
  • Vehicles
  • Furniture

Intangible Assets

Assets are intangible if they do not have a physical presence. Because intangible assets have economic benefits that almost always extend beyond one year, they’re typically not considered current and are only fixed assets.

Intangible assets include:
  • Patents
  • Permits
  • Copyrights
  • Trademarks
  • Brand reputation
  • Intellectual property

By Frequency of Use: Operating vs. Non-Operating Assets

Another way that assets are categorized is by its frequency of use for business operations. Under this classification, they can either be operating or non-operating assets.

Operating Assets

If an asset is used in day-to-day business operations, it is considered an operating asset. Oftentimes, these are assets that a company uses to produce a product or service.

Operating assets include:
  • Cash and cash equivalents
  • Bank balances
  • Copyrights
  • Licenses
  • Inventory
  • Equipment and machinery

Non-Operating Assets

An asset is considered non-operating if it is not used in a business’ daily operations but is still essential for its establishment and future needs.

Non-operating assets include:
  • Unallocated cash
  • Marketable securities
  • Accounts receivables
  • Idle equipment
  • Vacant land 
  • Unused real estate
  • Short-term investments

Why Are Financial Assets Important?

Calculating your assets is the first step toward determining your net worth and total equity. By taking the time to learn the different types of assets and how they’re categorized, you can better understand the state of your finances.

Once you’ve broken down the types of assets you own according to their cash convertibility, physical presence, and frequency of use, you’ll have more clarity to improve your processes and reach your goals with accuracy.

Want to Grow Your Financial Assets? Talk with Us​

Need help with a goal-oriented financial plan that covers all your assets and worries? Speak to one of our experienced advisors today and start securing the future you deserve.

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