What is a tangible asset?

A tangible asset is a physical asset owned by a company that can be seen and touched. Tangible assets hold monetary value and are listed on the balance sheet, typically under the category of property, plant, and equipment (PP&E).

Examples of tangible assets:

• Land owned by the company, including buildings and factories
• Buildings used for the company’s operations, such as office buildings, warehouses, or manufacturing plants
• Machinery and equipment used in the production process or for daily operations, which may include production machinery, computers, furniture, or vehicles
• Inventory a company holds for sale, including raw materials, work-in-progress goods, and finished goods

Characteristics of tangible assets:

• They have a physical form and occupy space
• Their value diminishes over time due to wear and tear, obsolescence, or market changes
• They are generally less liquid than intangible assets, meaning they can’t be quickly converted to cash
• They can be used as collateral to secure loans from lenders

Frequently asked questions

How are tangible assets valued on a company’s balance sheet?

Tangible assets are typically recorded at their historical cost, which is the original purchase price minus any accumulated depreciation.

How can companies manage their tangible assets effectively?

There are several ways companies can manage their tangible assets:

• Regularly maintain equipment and property to extend their lifespan and minimize depreciation
• Invest in high-quality, efficient tangible assets to improve operational efficiency and productivity
• Develop a plan for disposing of obsolete or unused equipment to free up space and potentially generate cash flow