{"id":1785,"date":"2019-11-26T11:28:04","date_gmt":"2019-11-26T05:58:04","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=1785"},"modified":"2024-07-11T12:01:43","modified_gmt":"2024-07-11T06:31:43","slug":"business-assets-definition-types","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/business-assets-definition-types\/","title":{"rendered":"Business Assets: Definition, Types &#038; More"},"content":{"rendered":"<blockquote><p><span style=\"font-weight: 400;\">Etymologically, \u2018assets\u2019 refers to any useful or valuable thing or a person. In business terminology, asset refers to any kind of monetary value owned by a business. <\/span><\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">Assume that you own a company called <\/span><i><span style=\"font-weight: 400;\">\u2018Nestford\u2019<\/span><\/i><span style=\"font-weight: 400;\">. Ranging from the office building you work in to the machinery you provide; from all the employees to the patents you have earned and the number of receivable accounts in your list, all of this falls under the big bracket called \u2018asset\u2019.<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d7b2dd54b7c\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d7b2dd54b7c\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/business-assets-definition-types\/#What-are-the-assets\" >What are the assets?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/business-assets-definition-types\/#Types-of-assets\" >Types of assets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/business-assets-definition-types\/#What-is-the-asset-turnover-ratio\" >What is the asset turnover ratio<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/business-assets-definition-types\/#Why-do-assets-matter\" >Why do assets matter<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-are-the-assets\"><\/span><span style=\"font-weight: 400;\">What are the assets?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Etymologically, asset refers to any useful or valuable thing or a person. In business terminology, asset refers to any kind of monetary value owned by a business. In short, an asset is an economic resource that is either:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">-owned<\/span><\/p>\n<p><span style=\"font-weight: 400;\">-not owned but is expected to provide benefits in the future<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A company usually lists its assets in its annually maintained <a href=\"https:\/\/razorpay.com\/learn\/balance-sheets-types-objectives-formats\/\" target=\"_blank\" rel=\"noopener noreferrer\">balance sheet.\u00a0<\/a><\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Types-of-assets\"><\/span><span style=\"font-weight: 400;\">Types of assets<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The most common assets include cash and cash equivalents. Often, physical and tangible items pop into our minds when we think of asset but not all assets are tangible! Broadly, here\u2019s how they are usually classified:<\/span><\/p>\n<h3><b>Fixed asset<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Fixed assets are also known as capital assets. These are required to keep the business going. These assets can be regarded as the backbone of a business. A few examples of this\u00a0 include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Land<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Buildings<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Vehicles<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Machinery<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">In reference to the above-mentioned examples, the workspace, laptops, furniture etc. form the fixed asset for<\/span><i><span style=\"font-weight: 400;\"> Nestford.<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">Apart from being used to generate income, they are important for businesses because they can be sold and if the business is in financial difficulty. These can also be used as collateral while availing business loans.<\/span><\/p>\n<p><em><b>Pro-tip:<\/b><\/em><span style=\"font-weight: 400;\"> Having a high ratio of the fixed asset gets maximum eyeballs-from employees, customers and everyone in between!<\/span><\/p>\n<h3><b>Current asset<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">All materials that are present in cash or are expected to get encashed within the tenure of one year are classified underthis bracket. Broadly, these include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Inventory<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Accounts receivable<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">With <\/span><i><span style=\"font-weight: 400;\">Attorney Rights<\/span><\/i><span style=\"font-weight: 400;\">, for example, the clients\u2019 pending payments or some acquisition\u2019s revenue form the part of current assets.\u00a0<\/span><\/p>\n<h3><b>Intangible asset<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">These are the ones that usually do not make a place in the company\u2019s balance sheet but contributes substantially to the asset value of a business. Few examples of intangible assets are:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Patents<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Favourable finance<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Client list<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Skilled employees\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Let\u2019s say <\/span><i><span style=\"font-weight: 400;\">Nestford <\/span><\/i><span style=\"font-weight: 400;\">has some awesome clientele and hardworking employees, who literally keep- the company going. In this case, they build up what we call the intangible asset of the company.\u00a0<\/span><\/p>\n<p><b>PS:<\/b><span style=\"font-weight: 400;\"> Now you know, assets are subject to changes and transfers (employees, for example)\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What-is-the-asset-turnover-ratio\"><\/span><span style=\"font-weight: 400;\">What is the asset turnover ratio<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">This is a commonly-used term to measure the efficiency of the existing assets to generate revenue. Here\u2019s how asset turnover can be derived:<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">Asset Turnover = Revenue\/ Total Assets Value<\/span><\/i><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Why-do-assets-matter\"><\/span><span style=\"font-weight: 400;\">Why do assets matter<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">In all, these define wealth. This means the asset is an important measure to look at for businesses and directly or indirectly help in projecting their growth bar. Asset valuation is a sensitive issue when a business is sold or acquired. Though it is easy to determine the value of fixed and current asset, measuring intangible asset is a problematic task. However, assets exist to add value to your business, always!\u00a0<\/span><\/p>\n<h4>Recommended Reads<\/h4>\n<ul>\n<li><a href=\"https:\/\/razorpay.com\/learn\/what-is-a-private-limited-company-advantages\/\" target=\"_blank\" rel=\"noopener noreferrer\">Planning to Start a Private Limited Company? Read This Guide<\/a><\/li>\n<li><a href=\"https:\/\/razorpay.com\/learn\/what-is-liability-in-accounting\/\" target=\"_blank\" rel=\"noopener noreferrer\">What is Business Liability &amp; Much More\u00a0<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Asset refers to any useful or valuable thing or a person. In business terminology, asset refers to any kind of monetary value owned by a business. <\/p>\n","protected":false},"author":151156465,"featured_media":11599,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3367,1383],"tags":[3384],"class_list":{"0":"post-1785","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-glossary","8":"category-business","9":"tag-assets"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/1785","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156465"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=1785"}],"version-history":[{"count":7,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/1785\/revisions"}],"predecessor-version":[{"id":2066,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/1785\/revisions\/2066"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/11599"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=1785"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=1785"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=1785"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}