Fixed Assets

Financial Dictionary -> Investing -> Fixed Assets

Fixed assets (sometimes called plant assets) are items that are used over and over again by the business. They include buildings, equipment and vehicles. They usually have a high monetary value with a long term function. Unlike current assets, fixed assets are harder to turn quickly in to cash. They are assets that the business plans to hold on to for a year or more and are not intended for immediate resale like stock and inventory.

Fixed assets are normally integral parts of the business that are needed for day to day operations to run efficiently. For example if a business suddenly didn't have their building or premises then nothing could go ahead.

Although company items like patents and trademarks are fixed assets in theory, they are usually referred to as fixed intangibles or fixed intangible assets. Although fixed assets are rarely sold, fixed intangible assets are even less likely to be sold by a company.

On a balance sheet fixed assets are listed, however over time their value decreases as they get older and less efficient. For example buying a car and selling it 5 years later will not cover the initial purchase cost. Recording this loss is considered an expense and in accounting it is called depreciation. Over time fixed assets generally depreciate.

Fixed assets are one of the many factors taken in to account when valuing a business and its worth. A business with lots of fixed assets is often considered financially secure in the long term.