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Understanding what assets are can help you know what financial resources you have and how to build a healthy financial portfolio.
By understanding what assets are, you can gather all types of financial resources both tangible and intangible. Get your balance sheet or statement of financial position ready and start brainstorming how to build your net worth through a more diverse financial portfolio.
Once you know more about the different types of assets, you can start accumulating marketable securities and keeping track of important financial ratios and your financial health on your own financial statement.
One example of an asset are precious metals like gold, silver, and platinum. For example, if you have gold, silver, or platinum in jewelry you don't want anymore, they can be turned into cash with our Cash for Gold service at any Check City Store!
What are Assets?
So what are assets? An asset is a type of financial resource that has monetary or investment value.
Another term you might hear when learning about assets is financial resource or even investment. It is a possession or property that has financial value. Some common asset examples might include real estate, stocks, or vehicles.
Assets can be owned by an individual, a business, or even a country and add to their overall value or net worth.
8 Different Types of Assets
Now that you understand the asset definition better, we can talk about the different types of assets and asset examples. There are primarily 8 different types of assets—current, fixed, financial, intangible, tangible, and liquid. You might hear about tangible assets and intangible assets most commonly.
1. Current Assets
A current asset is a financial resource that you expect to transition into cash flow within the next year. They can also be referred to as a short-term asset, short-term investment, or marketable security. A current asset example might be products you want to sell through your small business.
2. Fixed Assets
A fixed asset is a financial resource that you don't expect to convert into cash flow anytime soon, if at all. These can also be referred to as a long-term asset or long-term liability. A fixed asset example might be your home or a boat that you could sell one day in the future, but you might also keep forever.
3. Financial Assets
A financial asset is a financial resource that already has a financial form. The monetary value comes from a contract or legal claim. The most common examples are stocks, bonds, or bank deposits.
4. Intangible Assets
An intangible asset is a financial resource that doesn't have a physical form. It can sometimes be harder to evaluate their true value because they don't have a physical form. Patents, copyrights, intellectual property, franchises, and brands are some examples.
5. Tangible Assets
A tangible asset is a financial resource that does have a physical form. It is generally easier to evaluate their monetary value because they have physical form. Examples could include product inventory, raw materials, a car, or a house.
6. Liquid Assets
A liquid asset is a financial resource that is already available to use, like cash or bank account funds. Liquid assets include cash and cash equivalents like bank account funds.
7. Accounts Receivable
Accounts receivable are a type of financial resource that includes debts owed to you or the company for goods and services purchased with credit. Accounts receivable could include purchases made by customers with credit, unpaid loans, or IOUs from extending credit. In contrast, accounts payable refers to the money that a company owes creditors.
8. Personal Asset
A personal asset is any type of financial resource that is owned personally by an individual. These could include either tangible or intangible resources with monetary value like real estate, cash, bank accounts, stocks, mutual funds, or even retirement accounts.
How to Manage Assets
Managing assets can be involved and complicated. But learning to manage your financial resources well can literally pay off in the end and yield all kinds of future economic benefits. It can help you make more money, save money, generate passive income, and stop living paycheck to paycheck!
To manage your financial resources and investments, you'll want to have a thorough grasp on ROA, asset turnover, debt to asset ratios, asset protection and allocation, digital asset management, accounts receivable, and cash flow statements.
Return on Assets (ROA) Formula
Net Income / Total Assets = Return on Assets
Return on assets, otherwise known as ROA, is the number that shows how much an individual or company is making from their assets, considering their net income in comparison to their total assets.
Asset Turnover Ratio Formula
Total Sales / (Assets at the Start of the Year + Assets at the End of the Year) / 2 = Asset Turnover
The asset turnover ratio is a formula used to determine the overall value of resources. It can show a business how much revenue their marketable securities are bringing in directly or indirectly so you can measure this against the depreciation expense of necessary operating machinery like a property plant and equipment.
Debt to Asset Ratio Formula
Total Debts / Total Assets = Debt to Asset Ratio
The debt to asset ratio is a formula that measures how many of your financial resources are financed by creditors rather than investors. Basically, it shows you how much of your finances are leaning on debts.
Asset Protection
Businesses and individuals can both invest in asset protection. This is a legal practice used to protect your property from being taken in possible civil money judgments. It can also help keep your possessions from getting seized by creditors.
Asset Allocation
Asset allocation is the process of diversifying an investment portfolio with different types of assets. This is an important part of your asset and investment strategy and planning that creates a well-rounded portfolio.
Digital Asset Management (DAM)
Digital Asset Management (DAM) is the process of organizing and distributing digital, and often intangible, assets into one system. Companies might hire a digital financial manager to file and organize these digital resources. An individual might use any number of budget apps or a wealth management system or professional to manage their digital financial resources.
Cash Flow Statement
A cash flow statement is a type of financial statement that keeps track of all the financial resources and cash inflows and outflows on a balance sheet. It outlines the inward and outward flow of cash. With a cash flow system, you can monitor your financial health, your retained earnings vs costs, and keep track of your owners' equity.
