As Tangible And Intangible Assets Differ?

Tangible Assets

Tangible assets are physical and measurable assets used in the company’s activities. Assets such as property, plant and equipment, tangible assets. These assets include:

  • Earth
  • Means,
  • Equipment
  • Machines
  • Furniture
  • Inventory
  • Securities, such as stocks, bonds and cash.

There are two types of intangible assets:

Current assets include items such as cash, inventories and marketable securities. These items are usually used during the year and, thus, can be readily sold to raise money for emergencies.

Fixed assets are noncurrent assets that the company uses in their business activities. They are recorded on the balance sheet as property, plant and equipment (PP & e), and include assets such as trucks, cars, office furniture, buildings, etc. the Money that the company produces with the use of tangible assets included in the statement of profit and loss as profit. Fixed assets required for ongoing run the business.

Intangible Assets

Intangible assets generally, intangible assets that are used over a long period of time. Intangible assets are often intellectual assets, and as a result, it is difficult to assign a value to them because of the uncertainty of future benefits.

Intangible assets intellectual property, which include:

  • Patents,
  • Trademarks
  • Franchises,
  • Goodwill and
  • Copyright.
  • The company’s brand

Other types of intangible assets

Depending on the type of business, intangible assets can include domain names online, execution of activities, licensing agreements, service contracts, computer software, drawings, manuscripts, joint ventures, medical records, permits and trade secrets. Intangible assets can be added to the future value of the company and may be much more valuable than tangible assets.

The brand is an intangible asset because the value of a brand is not a physical asset and is ultimately determined by consumer perception of the brand. Brand capital contributes to the overall assessment of the company’s assets in General.

Positive brand equity occurs when there are favorable associations with the product or company that contribute to brand, which is achieved when consumers are willing to pay more for products with a recognizable brand than they would pay for a generic version.

For example, the buyer may be willing to pay $4.99 for a tube of Sensodyne toothpaste and not buying toothpaste sensitivity brand store for 3.59 $, despite the fact that cheaper. The Sensodyne brand has positive equity, which is translated as the value of the premium for the producer.

Negative brand occurs when consumers are not ready to overpay for the brand name version of the product. For example, manufacturers of commodity products such as milk and eggs, there can be negative brand because many consumers is not concerned with specific brands of milk and eggs that they buy.

As the brand is an intangible asset, it is intellectual property and goodwill, it cannot be easily taken into account in the financial statements of the company. However, a recognizable brand name continues to create significant value for the company. Investing in quality products and a creative marketing plan can have a positive impact on brand equity and overall profitability of the company. For more information, see what is the difference between goodwill and intangible assets?

Industries With Lots Of Intangible Assets

Some industries have companies with high share of intangible assets. They include the following:

Technology companies, especially in the field of computer companies, copyrights, patents, important employees, as well as research and development of key intangible assets. Apple. (Aapl stock), tend to have intangible assets.

Entertainment and media companies have intangible assets such as publishing rights and talents of staff.

Goods and services of the company have intangible assets such as patents, formulas and recipes, along with strong brand recognition are important intangible assets in today’s highly competitive markets. Coca-Cola (KO) is an example of an intangible asset with the value of its highly recognizable brand is almost invaluable and is a critical driver in the Coca-Cola success and profit of the company.

The healthcare industry typically have a high proportion of intangible assets, including trademarks, valuable employees, but also research and development of medicines and treatments.

The automotive industry also relies heavily on intangible assets, primarily patents and trade names. For example, brand names like “Corvette” and “Ferrari” are worth billions.

Bottom Line

Tangible assets are physical in nature, which can be long-term or short-term assets. Intangible assets long-term assets that are not physical, but intellectual property. Both tangible and intangible assets reflected on the balance sheet.

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