The Seven Different Types of Assets: A Comprehensive Corporate Guide

What are Assets?

Assets are resources with economic value that an individual, organization, or company owns. They provide a snapshot of a company’s financial wellbeing — its resources and potential for future growth. That snapshot can be leveraged by both the company and its stakeholders. 

There is a big difference between personal assets and company assets. Personal assets, such as homes and personal savings, are owned for individual use or investment. On the other hand, company assets contribute to business operations and fiscal standing. 

There are all kinds of legal considerations for company assets since they are integral to financial reporting and stakeholder insights. For example, companies must often stay compliant with certain financial disclosure regulations or tax implications. It may be especially important to safeguard assets involving intellectual property for certain organizations. Whatever the case, asset management comes with both financial and legal implications.

How to Discuss Different Types of Assets

Before you can count up your company’s assets, you need to know how to classify what you’re looking at. Let’s start this process by defining some key terms—these terms can offer insights into how they are valued and why it matters.

• Liquidity. Assets can be classified based on their liquidity, or the ease with which they can be quickly bought or sold in the market without significantly impacting its value. Assets can range from highly liquid (easily converted to cash) to less liquid.
• Function. Classifying assets by function considers their role in business management and operations.  For instance, current assets like cash and inventory are directly involved in daily operations — they help facilitate your run-of-the-mill production transactions. Fixed assets, such as buildings and machinery, support the company’s operations in a more long-term capacity by providing the necessary production infrastructure. These current and fixed assets both affect production processes, but serve different functions. 
• Market Value. The market value represents the price an asset could fetch in the current economy. This phrase is commonly used when discussing financial assets like stocks and real estate.
• Book Value. This is the value of an asset as reported on the company's balance sheet. For tangible assets, it's the historical cost minus accumulated depreciation. For financial assets, it may be the purchase price.

With this terminology in mind, you’re ready to analyze the different types of assets that contribute to your company’s value! 

The Seven Different Types of Corporate Assets

1. Current Assets

Current assets are the liquid and short-term assets that a company holds. These are typically expected to be converted into cash or used up within one year or operating cycle. These assets play a big role in a company's day-to-day operations and short-term financial health. They can help pay off more immediate debts and address any unforeseen financial needs that may arise. 

Current assets help organizations become more independent since they aren’t completely reliant on external financing. Their liquidity also provides flexibility and resilience as organizations navigate their business environment.

Examples of current assets

• Cash: Physical currency or its equivalents held in bank accounts.
• Mutual Funds: Investments in funds that comprise a diversified portfolio of stocks, bonds, or other securities.
• Accounts Receivable: Money owed to the company by customers for goods or services provided on credit.
• Inventory: The value of goods or products a company holds for sale.

2. Fixed Assets

Fixed assets, also known as non-current or long-term assets, are durable resources that a company acquires for prolonged use. These assets are not easily convertible into cash and are expected to provide value over an extended period — the company doesn’t usually intend to sell them. Fixed assets also play a role in the operational stability and growth of a company.

Unlike current assets that are used up or converted relatively quickly, fixed assets provide enduring benefits. They do impact the here and now, but they also represent a substantial investment in the company’s future success and organizational development.

Examples of Fixed Assets

• Buildings: Real estate properties owned by the organization, including offices, manufacturing facilities, or warehouses.
• Machinery: Equipment and tools used in the production or manufacturing processes, such as industrial machinery or specialized tools.
• Vehicles: Company-owned vehicles utilized for transportation of goods, services, or employees.

3. Tangible Assets

Tangible assets, like land, are physical assets, meaning they can be touched or seen. These assets typically contribute directly to a company's operational capacity. They also play a key role in valuation since they reflect the tangible worth of a business. This makes them huge players in financial reporting and determining a company’s net worth. It also means tangible assets can serve as collateral for loans or other financial transactions.

Examples of Tangible Assets

• Land: Real estate properties owned by a company for various purposes such as offices or storage.
• Inventory: Physical goods and products held by a company for sale or production.
• Machinery: Equipment and tools used in manufacturing or operational processes, including industrial machinery or specialized tools.

4. Intangible Assets

Intangible assets are non-physical resources without a tangible presence but hold significant value for a company. These assets often contribute to a company's competitive advantage and brand recognition. 

Because these assets are not physical, valuing and accounting for them can present unique challenges. Their valuation is a bit more subjective and doesn’t always have a clear market value. As such, they are also often influenced by market fluctuations or consumer preferences. These factors make it challenging to predict and measure the long-term value of intangible assets accurately.

Examples of Intangible Assets

• Intellectual Property: Patents, copyrights, and trademarks that provide legal protection for unique ideas or creative works.
• Brand Equity: The value associated with a brand's reputation and market perception. These often contribute to higher sales and customer preference.
• Goodwill: The intangible value of a business beyond its tangible assets and liabilities. This is often represented in factors like customer relationships and company reputation.

5. Financial Assets

Financial assets are tradable instruments representing a claim to future cash flows. They provide a means for individuals and entities to store or grow wealth. These really come into play in investment strategies and portfolio management.  Investors strategically allocate their funds among different asset classes to achieve specific financial goals, such as income generation or capital appreciation. Diversifying across various financial assets helps manage risk and optimize returns.

Examples of Financial Assets

• Stocks: Ownership shares in a company, granting rights to a portion of its assets and profits.
• Bonds: Debt securities where investors lend money to an entity — typically a government or corporation — in exchange for periodic interest payments and the return of principal at maturity.
• Preferred Equity: Hybrid securities with characteristics of both debt and equity, often entitling holders to fixed dividends before common shareholders.

6. Operating Assets

There are also operating assets, which can be tangible and intangible assets that a company uses in its day-to-day operations to generate revenue. These are often at the core function of businesses and directly contribute to operational success. They help meet product demands and enhance production efficiency, which also supports the growth of the company.

Examples of Operating Assets

• Machinery and Equipment: Manufacturing machinery and specialized equipment used for goods production and service delivery.
• Real Estate: Buildings and facilities used for production, offices, or storage. 
• Technology and Software: Software systems and technology infrastructure supporting various business functions. 
• Fleet Vehicles: Vehicles used for transportation and delivery or any other operational function.

7. Non-operating Assets

Finally, there are non-operating assets, which are resources that a company holds but does not use directly for core business operations. Unlike operating assets, which actively contribute to revenue generation, these are often held for investment purposes or strategic reasons. 

Many financial assets can fall into this category. They help reduce reliance on a single revenue stream and help mitigate risks associated with business fluctuations. For example, surplus real estate can be sold to generate capital for debt reduction or strategic expansions.

Examples of Non-operating Assets

• Investments: Stocks, bonds, or other financial instruments held for investment purposes rather than to support day-to-day operations.
• Surplus Real Estate: Real estate properties or land not used directly in the company's operational activities that may be held for potential development or resale.
• Non-operating Vehicles: Vehicles owned by the company but not utilized for core operational functions. These may include surplus or inactive fleet vehicles.
• Unused Equipment: Machinery or equipment that is no longer actively used in the production process or has become obsolete.

Leveraging Assets for Employee Wellbeing

Knowing the key differences between different types of assets can help CEOs and CFOs leverage their assets more efficiently. From investment portfolios to brand equity, business assets can shape an organization and reflect its overall value.

As you decide what kind of assets are worth investing in, it can be helpful to invest in employee benefits too. Employee wellness programs can not only boost employee satisfaction and productivity, but they can also help lower healthcare costs. An exciting 72% of employers saw a reduction in healthcare costs after implementing a wellness program.

Curious about how these programs from Wellhub can transform job performance? Talk with a Wellbeing Specialist to learn more about the connection between wellness initiatives and financial health.