Definition 1.
Any item of value owned by a business. A firm''s assets are listed on its balance sheet, where they are set off against its liabilities. The assets of a business are the capital stock that make it possible -- with the addition of labor -- for the company to generate a profit. Assets may include factories, land, inventories, vehicles and other items. But not all assets are created equal. Some assets, such as cash, are easy to value and liquidate. Others, such as buildings and farmland, are quite real too, if somewhat more difficult to value accurately. These kinds of assets are collectively known as tangible assets. Intangible assets, such as goodwill, also can be important to the success of the enterprise. Goodwill, for instance, could include a valued brand name gained in an acquisition (a famous brand, such as Coca-Cola, doesn''t normally show up on a balance sheet otherwise). In general, firms are required to carry assets on their books at cost less depreciation. This conservative principle means that the balance sheets of most companies understate the true value of their holdings. Land purchased 50 years ago and carried at cost might be worth many times the initial price, for instance. Conversely, a firm that owns a brand new buggy-whip factory might in fact overstate the value of its assets by carrying them at cost. For banks, most assets are in the form of loans (deposits are liabilities).
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