Tangible assets are the holdings of a person or company that are real and real, rather than hypothetical. They are contrasted with things that an individual or company may have that are not tangible.
Examples of intangible assets include things like copyrighted ideas, patents, or intellectual property. While these things may have the potential to be financially beneficial in the future, they are not currently something that can be sold for big profits in most cases.
Real estate is an example of tangible assets.
On the other hand, most tangible assets can be easily converted to cash or are already cash. The amount of money in your bank account is tangible, as is the property you own, such as cars, houses, or boats.
These tangible assets, especially if you want to obtain a loan, are usually the types of collateral you provide for the loan. Most banks will not offer loans to people without tangible assets, even if they have intangible assets that have the potential to generate income in the future.
Cash is a type of tangible asset.
In businesses, physical and real assets can be weighed when a business applies for a loan. Possessions included in the list of tangible assets for the business include business inventory, property owned by the business, and equipment owned by the business.
The actual assets of a lumber company may include its current stock of lumber, any machines used to make lumber, the plant where the company operates, and any cash the company currently has.
Sometimes when trying to obtain a loan, banks may consider only a few assets as acceptable collateral.
In the example above with the lumber company, a bank may not consider inventory or equipment as an ideal means of guaranteeing loan repayment. First, inventory can change and there is nothing to stop the logging company from selling its wood.
Second, if the business goes out of business, the lender will be forced to liquidate the real assets. The lender may not want the hassle of selling lumber or equipment and is more likely to consider tangible assets from cash balances and real estate, as cash is easy to take and real estate is fairly easy to get. to sell.
However, when a business is sold, the actual assets are often considered part of the sale price.
A lumber company with new machines and a sizable pile of lumber will have a higher price than a simple warehouse with outdated machines and no inventory.
Intangible assets are also used. Some intellectual property, patents or developments that are not yet in production may be so attractive in the potential profit margin that it is worth buying or even lending money so that a person can develop the intellectual property to create tangible assets such as cash.
Some companies are bought and sold based on their patents or their earning potential, and they command a high price because of this income potential, although the tangible assets of the company are currently not highly valued.
A car that is written off is a tangible asset.