Glossary
Asset
Anything a company or person owns that has economic value and is expected to provide a future benefit, from cash to factories.
On this page
An asset is a resource a business or person controls that has economic value and is expected to produce a future benefit, whether by being sold, used to make products or converted into cash. On a company's balance sheet, assets are everything listed on one side of the basic accounting equation, and they are what lenders and shareholders ultimately have a claim on.
How assets are classified
The balance sheet sorts assets roughly by how quickly they become cash:
- Current assets: cash, short-term investments, accounts receivable, inventory and prepaid expenses, all expected to be used or collected within a year.
- Non-current assets: property, plant and equipment; long-term investments; and intangible assets such as patents, trademarks and goodwill.
Most assets are carried at historical cost, less depreciation or amortization, not at today's market value. A building bought in 1990 may appear at a fraction of what it would sell for, while goodwill may be worth far less than its stated figure if an acquisition went badly.
Other meanings
In investing, "asset" also describes anything you can own for a return, and an asset class is a broad category with similar behavior, such as stocks, bonds, cash, real estate or commodities. For an individual, assets include savings, investments, a home and a car; subtracting debts from them gives net worth.
Ratios such as return on assets and the current ratio measure how productively and safely a company uses what it owns.