Assets VS abilities, what is the difference between these two terms? What is related to monetizing and cash flow management , and what is a risk factor in the corporate’s operations?
The simplest definition is what is said usually in the business world : “Assets are what you own, liabilities are what you owe to other” … Simple isn’t it ?
And you should know that : The more your assets outweigh your liabilities, the stronger the financial health of your business. But if you find yourself with more liabilities than assets, you may be on the cusp of going out of business.
Examples Of Assets :
- Cash in the bank and cash in the vault ( that one in the office or branches ) .
- Stocks available in the warehouses, or in the shops – which didn’t pay for the stocks yet.
- Office equipment and related ( computers , printers, softwares , licenses )
- Real-estates, lands and buildings ( all kinds ) ,
- and vehicles, cars or heavy vehicles ( and trucks ) , that the company owns – but not the owners’ property
Examples Of Liabilities
- Bank debts
- Bonds the corporate had issued ( a semi or full-Gov. body / or market-wide corporate can do such )
- Wages and salaries that aren’t paid yet
- Taxes and fees to be paid for the Gov. in certain periods
- Amounts owed for the suppliers ( stock / services , etc … ) costs, money that isn’t paid yet .. They should be paid in the coming times.
What are types of assets ?
Assets can be grouped in many ways, we will consider the most famous ones here , like :
Liquidation status & Tangibility
This factor is related to the ability to turn the asset in cash; how much time and efforts this takes to be done.
Liquidating a car is harder than liquidating some computers or furniture , but easier than selling a factory or heavy machinery , for example.
Easily liquidated assets ( easily salable in less than one week ) are called Current Assets, but assets that are harder to liquidate are grouped differently, they are called The fixed assets. They are held longer in the corporate’s books, and – usually – have high values and longer times to be fully consumed.
A remarkable categorisation of the assets in the corporate, the asset’s tangibility.
A tangible asset is an asset that can be touched or felt or seen by the human eyes – have a physical body.
& intangible assets ?
But corporates have more than just “touchable” assets, they have Intangible assets. The assets that can’t be touched and are non-physical in nature. Examples include features such as “Brand-names, domain names, software or even computer databases, even customers names and emails” . These assets are believed to bring in more company value than the tangible which are subject to depreciation.
Liabilities – How to differentiate ?
A liability is the amounts owed to other parties, and obligation on the corporate to be paid . It required the corporate to give away some economical benefits to fulfill this obligation.
Current & Long term liabilities
Current obligations are obligations to be paid within 12 months from the due date . All liabilities with longer payment terms are classified as long-term. That includes bank loans, taxes, debentures amounts , and even the pension payments, etc…
Liabilities are mentioned , in the corporate’s balance sheets, in the left section
Assets vs. Liabilities: Comparison Chart
The Comparison table is courtesy of DifferenceBetween.Net ).
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