In this article, Shruti Chand (ESSEC Business School, 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.
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:
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 improvements
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:
4. Other assets: All the assets of non-current nature that can not be liquidated
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.
- 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.
- By launching the series of Market maker simulations, you can extend your learning about financial markets and trading approaches.
About the author
Article written by Shruti Chand (ESSEC Business School, Master in Management, 2020-2022).