What role do the company's assets play in the formation of the company's profit

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Personal property of a company, which is represented in tangible, monetary or intangible terms, is called an asset. Depending on the sources of formation, such objects have different liquidity. Values purchased with equity are considered net assets, while borrowed funds are usually used to acquire gross assets.

What role do company assets play

Material assets include fixed assets of the enterprise, buildings for various purposes, equipment for the production line, stocks and raw materials. These objects have a material form and participate in the formation of the cost of goods due to depreciation and full write-off.

The company's cash assets are current assets that are at the personal disposal of the company. This type of value can include the contents of bank accounts, cash on hand, securities, and even accounts receivable. Quite often, companies haveright to certain patents, trademarks or logos. Such intellectual property is categorized as intangible assets.

Non-current and current assets of the company

If we consider the degree of participation of material assets in the production process, then we can divide all assets into two groups: current and non-current.

• Such objects, which in the process of economic activity are fully spent on the production of certain goods or services, are called circulating. The value of assets plays a direct role in the formation of the cost.
• Values involved in several production cycles by partially transferring their value to goods are called non-negotiable.

Separation of assets depending on the sources of formation and the degree of liquidity

The company's assets can be formed on the basis of own and borrowed funds. Values acquired with one's own money are called net assets, and objects purchased with borrowed funds are considered to be gross. The degree of liquidity of assets can also be different. Objects that can quickly turn into money are the most liquid and have the highest value in terms of profit.

According to the rules of economics, assets are distributed according to their financial importance from the highest to the lowest value. For example, cash is listed first, followed by receivables and inventories, and the last group includes future expenses.periods and long-term fixed assets.

This grouping is relevant enough to determine the financial stability of a company in a difficult economic situation. In case of bankruptcy of the enterprise, the assets must fully cover the debt that has arisen. In addition, when considering an application for a loan, banks carefully analyze the profitability and solvency of the company.

When trying to deal with the question of what assets are, the first thing to remember is that whatever material assets are, they must be converted into cash as efficiently as possible. Newly acquired assets can be invested in further business development, directed to the implementation of new projects and improvement of working conditions.

How useful are intangible assets

Let's try to figure out what assets are called intangible. Until recently, such a concept did not exist at all in the terminology of Russian business. With the manifestation of innovative technologies and software products, such a term as the company's intangible assets has become quite often used in the formation of the cost of goods. The notional value of intellectual property items was included in depreciable amounts. When doing business in the field of trade and provision of services, such concepts as know-how, copyright, goodwill have acquired the status of values that characterize the overall financial condition of the company.

Forprofessional management of all resources of the enterprise, it is necessary to know quite well the mechanism for converting the company's assets into cash. Proper regulation will help maximize profits for the firm and avoid unwanted bankruptcy.