Long-Term Assets

In this article, Shruti CHAND (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2022) elaborates on long-term assets.

This read will help you get started with understanding long-term assets on the balance sheet of a business.

Introduction

Long-term assets on a balance sheet represent all the assets of a business that are not expected to turn into cash within one year. They are represented as the non- the current part of the balance sheet. These are a set of assets that the company keeps for the long-term and is not likely to be sold in the coming years, in some cases, may
never be sold.

Long-term assets can be expensive and require huge capital which might result in draining cash reserves or increasing debt for the firm.

The following category of long-term assets can be found in the balance sheet:

1. Investments:

These are all the long-term investments by a company in securities, real estate, and other asset classes. Even the bonds and other assets restricted for long-term value are treated as investments by the company.

2. Property, plant, and equipment:

Property that the company owns associated with the manufacturing process or other business operations. An important aspect about this asset class is the depreciation associated with the value of the asset over time.

Typically, you can find the following items disclosed as property, plant and equipment on the balance sheet:

● Land
● Land improvements
● Buildings
● Furniture
● Machinery
(Less: Depreciation)

3. Intangible assets

Intangible assets are the assets without a physical existence. These items represent the intellectual property of a business acquired through their operations, marketing and other efforts to create value. The most notable
intangible asset on a balance sheet is Goodwill.

Other intangible assets found in the financial statements are:

● Copyrights
● Trademarks
● Patents

4. Other assets: All the assets of non-current nature that can not be liquidated
easily.

Final Words

Since a company holds the long-term assets for a long period of time, the changes in the long-term assets can be a sign of liquidation in some cases. When investors study the balance sheet of a company, they can see if the company often sells its long-term assets then it can be a sign of financial difficulty.

Relevance to the SimTrade certificate

This post deals with Long-Term assets which are used by various  investors to study the financial health of a business.

Additional courses:

• By taking the market orders course, you will know more about how investors can use various strategies to invest in order to trade in the market.

About practice

• By launching the series of Market maker simulations, you can extend your learning about financial markets and trading approaches.

Related posts on the SimTrade blog

   ▶ Shruti CHAND Balance sheet

   ▶ Shruti CHAND Current Assets

About the author

Article written in October 2021 by Shruti CHAND (ESSEC Business School, Grande Ecole Program – Master in Management, 2020-2022).