Business Acumen Q & A – What is an Asset?

Ask The Acuman:™  What Are Assets?

Question:

I’ve read a few popular books lately about personal wealth.  Many of these books take the position that if it takes money “out of your pocket,” it is a liability not an asset.  Financial news shows often contradict this.  Can you clarify what an asset is or is not?  Thanks,  Jim

Answer:  Today’s answer is offered by David Buckner

Thanks Jim.  This is a great question and is really about understanding the acumen used in the corporate world.  I’ve heard your question before.  If you look at the way Wall Street or the financial sector defines assets, it is a little different.  Assets in short are property and items of value owned by a person or business.  There are a couple of primary classifications of assets.  These are current assets, long term assets, prepaid and deferred assets, and intangible assets.  Let me discuss two common assets in more detail.

Current Assets are cash and other liquid instruments, including accounts receivable that can be converted to cash within one year at maximum.

Long-term Assets are plants, equipment, real estate and other capital assets, and net of depreciation.

Quick tip:  A way to remember this is that Assets = What We Have

Thanks for the question!