Broadly speaking, the assets on a company's balance sheet may generally be classified into two categories: 澳洲幸运5官方开奖结果体彩网:current assets and fixed assets. This article expla🃏ins the difference between these two silos and highlights the significance of each group.

澳洲幸运5官方开奖结果体彩网:Current assets are highly liquid, and consequently may be easily converted into cash in less than one year. Current assets are typically used to finance operational ex🅘🅷penses needed to fund day-to-day operations. Current assets may include:

• 澳洲幸运5官方开奖结果体彩网:Cash and cash equivalents like certificates of deposit
• 澳洲幸运5官方开奖结果体彩网:Marketable securities like equity or debt securities
• 澳洲幸运5官方开奖结果体彩网:Accounts receivable, or money owed by customers to the company for sales that typically must be paid within 90 days
• Inventory, including finished goods as well as raw materials
• 澳洲幸运5官方开奖结果体彩网:Prepaid expenses

澳洲幸运5官方开奖结果体彩网:Fixed assets are 澳洲幸运5官方开奖结果体彩网:long-term assets a company uses to finance the production of its goods and services. Fixed assets have useful lives greater than one year and are listed on the balance sheet as 澳洲幸运5官方开奖结果体彩网:property, plant, and equipment (PP&E). Fixed assets are often referred to as 澳洲幸运5官方开奖结果体彩网:tangible assets because they have physicaജl properties that can be seen and touche꧃d. Fixed assets can include: 

• Vehicles like company cars and delivery trucks
• 澳洲幸运5官方开奖结果体彩网:Office furniture
• Machinery
• 澳洲幸运5官方开奖结果体彩网:Office Buildings
• Warehouses
• Land

Striking a Bal♐ance Between Fixed and Current Ass༺ets

Many wonder if companies should strive to create a balance between their current and fixed assets. The answer to this question entirely depends on the type of industry in question. For example, Software as a service (Saas) businesses traditionally have higher amounts of current assets in the form of surplus cash, mainly due to the fact that their products are sold online, and their transactions are swiftly conducted--often electronically. The onlyꦰ fixed assets with companies like these include office furniture and computer equipment. 

ಌ Risk-averse 𝓰investors tend to favor companies with higher ratios of current assets, because such businesses will always have the cash on hand needed to pay salaries, move product, and keep the wheels of business rolling. This gives investors greater comfort than they might take from investing in fixed asset-heavy businesses, who may have to halt operations because it takes them a year or more to generate emergency cash during stressful periods.

On the other hand, there are certain advantages to having high levels of fixed assets. Namely, these assets undergo 澳洲幸运5官方开奖结果体彩网:depreciation, letting companies expense those costs over their 澳洲幸运5官方开奖结果体彩网:useful lives. This๊ helps those companies avoid major losses during years they purchase big-ticket physical items, by let🌳ting them spread out costs over several years.

The Bottom Line

Current assets can be converted into cash quickly, while fixed assets are long-teಌrm assets that a company relies on to generate long-term growth.