# 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