Tangible and Intangible Assets

Tangible and Intangible Assets

An asset is anything of value, meaning it can be converted to cash that an individual or company owns. Assets are important because they are believed to benefit anyone who owns them, as they can generate cash flow or reduce expenses in the future. Assets are also important as they can increase the value of a company if owned enough to outweigh liabilities. They are mainly categorized into current, fixed, tangible, intangible, operating, and non-operating assets.

Tangible assets appear in their physical form and are quantified like vehicles. Intangible assets, on the other hand, are not in a physical form, for instance, licenses, and are difficult for competitors to analyze and imitate when they grow over time (Hitt et al., 2016). Tangible assets have a certain economic value and can be considered long-term or short-term depending on the asset. In contrast, intangible assets have a commercial value and can act as long-term resources (Franklin et al., 2019). Lastly, tangible assets can be easily destroyed by natural calamities like fire, while intangible cannot. However, poor decision-making can destroy intangible assets, for example, when Elon Musk was fined $20 million for a comment on Twitter.

In some market and industry conditions, one of the two assets will be considered more important than the other. For instance, if a company needs money, it can sell one of its tangible assets as it is easily valued and is physically compared to an intangible asset. In this case, the tangible asset is considered more important. Finally, when another company purchases a company, factors like the recognition of the selling company and service can appreciate the price as goodwill. In this situation, the intangible asset is more important. Conclusively, tangible and intangible assets are both important and add value to companies and individuals in different ways. Both should be appreciated and used to solve any crisis accordingly.

References

Franklin, M., Graybeal, P. and Cooper, D. (2019) Principles of Accounting. OpenStax, Rice University.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2016). Strategic management. Cengage Learning.

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Tangible and Intangible Assets

Describe the difference between tangible and intangible assets. What are the market and industry conditions where each may be the more important of the two? Explain why and how this occurs.