What is the difference between a fixed asset and a current asset?

what is fixed asset turnover

Fixed assets are long-term, tangible assets such as land, equipment, buildings, furniture and vehicles. Fixed assets are parts of the company that help with production and are components that last over time in the company. They are physical assets that can be seen. They are not used for liquidation purposes to contain debt within a business or cashed out in any way to aid a business financially.

Current assets are the general inventory of a company, including cash, accounts receivable, insurance claims, investments, and intangible or non-physical items. Current assets account for the worth of a company, showing the earnings-to-debt ratio by the year's end. Each current asset has the ability to be cashed out to financially help the business or liquidated to save the company from debt or

bankruptcy.

Fixed and current assets are recorded on a balance sheet. which is a statement showing the worth of a company at a certain point in time. The balance sheet shows the company's spending habits and inventory compared to its income. This helps the company determine where to cut back expenses and how to plan future budgets.

The three main categories to fill out on a balance sheet are assets, liabilities and owner's equity. The assets are the fixed and current assets. Liabilities are items causing debt to the company, and equity is the value of shares issued by a company. Each balance sheet is filled out annually so that potential investors or banks know if the company as a whole is a liability or investment opportunity.

Source: www.investopedia.com

Category: Bank

Similar articles: