Arthur Sullivan describes
in his book ‘Economics: Principles in action’ that “assets represent the value of
ownership that can be converted into cash”. It's an economic resource, It
can also be seen as the “possessions which are tangible or intangible in nature
which can be en-cashed” So, what are the different kinds of assets? Let’s look
at them a little deeper.
- Cash: Money that a firm can count in
the form of currency. It is the most liquid or handy money available to
the firm.
- Bank deposits: Banks are authorized institutions
to manage money. The firm keeps its money in the current account (a/c).
Individual’s money is kept in saving a/c. Surplus money can also be
invested in fixed deposit a/c to earn more interest. This is second most
liquid form of assets.
- Stock/Share: Often, surplus money is invested
in the shares. By trading these shares, you can generate some immediate cash.
But it is important to understand and accept that the trading of
stocks/shares is a risky proposition and a business in itself. Thus,
sufficient knowledge and understanding of the stock industry is required
before you step into this venture.
- Mutual fund: Mutual fund is also an investment
in shares. The difference here is that your shares are managed by
recognized financial institutions. You can read about nine basic concepts
associate with mutual funds here
- Foreign exchange: The practice of currency trading
is also commonly referred to as foreign exchange, Forex or FX. Every
country has its own set of rules for trading in Forex. This is similar to
stock market where return on investment is not guaranteed due to its
speculative nature.
- Movable and immovable assets: Most likely, this is where your
major block of assets will be lying. Immovable asset is an asset that
cannot be moved without destroying or altering it. For example, an estate
or a house. Whereas movable assets are those which can be transferred from
one place to the other without any damage or alterations. For example,
stocks, cash, furniture, vehicles, office equipments, jewellery, etc.
- Intangible assets: This is not reflected in the
account statement, but you build it significantly if you understand the
importance of it. By and large, intangible assets cover goodwill, patent,
franchise, copyright etc.
Additionally, assets can also be
categorized as:
Fixed assets: It is a term used in
accounting for assets that cannot easily be converted into cash. For example,
furniture and equipments, property and buildings, vehicles, etc.
1.
Current assets: These are assets available to the owner as an
immediate source of money. For example, cash on hand, fees receivable, pre-paid
expenses, insurance, bank deposits etc.
Read more interesting articles
about Financial Management:
No comments:
Post a Comment