the Company's Assets

the Company's Assets

Company's Assets

Assets are the company's possessions, and are classified in the order of permanence as follows:

1. FIXED ASSETS, which are primarily for the purpose of production, rather than for sale (although their sale is not to be excluded). Their permanence consists in their being in constant use to carry on the company's business, such as land, buildings, plant, machinery, tools and furniture.

2. CURRENT ASSETS (of two categories):

(a) CIRCULATING: Assets acquired in the course of business with the intention of converting them ultimately into cash, which in turn may be used to purchase fresh assets, themselves to be cashed, and so continue to circulate, such as stock-in-trade, work-in-progress and trade debtors.

(1') LIQUID: Assets readily available to meet immediate liabilities or planned undertakings, such as cash and short-term investments which are quickly realisable securities (hence also called quick assets).

3.INTANGIBLE ASSETS, which arise from a company's standing and reputation, and are sometimes given monetary value although their extent is uncertain. They are usually introduced when a subsidiary is acquired, and may be converted into cash when the subsidiary is sold. These are goodwill, patents rights, trademarks and effect of advertising.

The balance sheet as a whole

Looking at the balance sheet as a whole it is worth while for the investor to consider carefully three questions:

(i) What is the true total capital the company employs? (if) How much of this do the shareholders own?

(iii) 'What is the working capital?

Obviously the terms used in these questions need to be clearly understood.

The true capital employed by a company: You will see on the liabilities side of a balance sheet figures for share capital, reserves, loan capital and industrial loans. These amounts have all in fact been used as capital to acquire the assets shown in the balance sheet. Thus obviously the true total capital employed by a company is represented by the figure kr Permanent and Longterm Liabilities, which itself indicates the size of the company's affairs, whether they are small-scale or large-scale.

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