What are tangible assets?
A tangible asset is one that has a monetary value and, in most cases, a physical form. Tangible assets can almost always be traded for money, though the liquidity of different markets varies. Intangible assets, on the other hand, have a theorised value rather than a transactional exchange value.
Uses of tangible assets
A company's net worth and core operations are heavily reliant on its assets. Asset management and asset implications are two major reasons why businesses keep a balance sheet. On the balance sheet, assets are recorded and must balance in the simple equation assets minus liabilities equals shareholders' equity, which governs the balance sheet. There are two kinds of assets in a business: tangible and intangible. Tangible assets have a finite or discrete value and, in most cases, a physical form. These are tangible items that a company uses in its operations and can be touched and used in the real world. The assets of a company reveal its net worth. The assets aid the company's financial stability and the smooth operation of its operations. When a company needs financial assistance to start, expand, or save its business, it may require these assets. For example, if a company needs more money to avoid bankruptcy, it may first sell its assets to generate more money.
Advantages and Disadvantages of tangible assets
Advantages
- A company with a high tangible asset value can always be liquidated and converted into cash.
- Companies in high-risk industries, such as banking and finance, rely on tangible assets to reassure investors.
- The company will be secure as long as the value of its tangible assets exceeds the amount at risk. The more money you have, the greater the amount of risk you can take.
Disadvantages
- In a free market, a company must distinguish itself from its competitors. To do so, it must concentrate on what it does best and what it has that no one else in its industry has.
- The disadvantage of tangible assets over intangible assets is that they are non-exclusive. Any business can have the same tangible assets as another.
- Tangible assets alone will not sustain your customer base.
