Total assets are all holdings of an individual or company that has monetary value. The value of total assets is inherently based on the purchase price and not the current market value of the assets. Total assets are reflected on a company's balance sheet and may be listed as either current assets or fixed assets.
Current assets are short-term assets that are more likely to be turned into cash, sold or consumed within a year during the course of business. Cash, securities or short-term investments, accounts receivable, notes receivable, inventory, and prepaid expenses are some common examples.
Cash refers to all the funds deposited in a bank. Marketable securities, alternatively, are short-term investments in stocks and bonds that are more apt to be sold in no greater than one year. Accounts receivable, also called Debtors, represents the money owed to a business for goods and services provided on credit. Notes receivable is quite similar to accounts receivable except that is uses a written promise to pay in the form of promissory notes. These are legally-binding written promises signed by customers to settle debts at a specified time. Another kind of current asset is inventory, which is the sum of all raw materials, work in progress items or finished goods which are expected to be sold in less than a year. Prepaid expenses are assets which are paid prematurely such as rents and insurance premiums.
Total assets can be written on balance sheets as fixed assets as well. Fixed assets are a kind of asset that an owner obtains for extended use, and are not meant to be sold for at least one year. Also known as non-current assets, fixed assets cannot be easily converted into cash. Fixed assets can be further subdivided into three: tangible, intangible and investments.
Tangible assets are those holdings of individual or company that are real, actual, and physical in nature. Examples are land, buildings, machineries and equipment, and motor vehicles. Intangible assets, on the other hand, are assets that cannot be physically measured. Trademarks, licensing agreements, broadcast rights, franchise agreements and copyrights are just a few examples. Investments listed under fixed assets are short-lived investments in stocks and bonds that are not expected to be sold in one year or less.
Total assets give you a snapshot of your financial capabilities as a business. Knowing where you stand now can help you plan ahead for the future.
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