What is an asset?

An asset is anything with economic value that can be owned or controlled by a person or company. Assets can be physical, such as tangible assets or real property, or non-physical, such as intellectual property rights or financial obligations. Assets are generally classified into two broad categories: current assets, which are assets used or consumed in the conduct of a business during the current year, and non-current assets, which are assets that do not are not used or consumed in the course of a business during the current year.

What is an asset for?

Assets are generally used to produce wealth or money, by either being sold or used to produce income. For example, a business may use its assets, such as its machinery, raw materials or buildings to produce goods or services that it will sell for a profit. Assets can also be used to generate passive income, such as when a business rents its buildings to other businesses or when an individual receives rent from a property they have rented out.

Who is responsible for managing a company’s assets?

Financial department

The management of a company’s assets is generally carried out by the company’s financial department, which is responsible for planning, organising, directing and controlling all of the company’s financial activities. The financial department can be divided into several sub-departments, such as accounting, treasury, management control. Each sub-department has specific responsibilities for managing company assets.

Management companies / asset managers

In addition, it is common for companies to entrust the management of some of their assets to management companies or asset managers, who are professionals specialised in the management of financial assets. These companies or managers are responsible for determining the investment strategy best suited to the company’s objectives and implementing that strategy by buying and selling financial assets on behalf of the company.

What are the different types of assets?

The assets are mostly gathered into four main categories:

Financial assets

Financial assets are financial instruments that can be bought or sold and have financial value. They include stocks, bonds, mutual funds and derivatives.

Stocks represent a share of ownership in a publicly traded company and entitle you to a share of the company’s profits in the form of dividends. Bonds are debt securities issued by governments or companies to raise funds. These give the right to a fixed interest rate and a repayment of capital at maturity.

Mutual funds are investment vehicles that pool money from different investors and invest in a diversified portfolio of stocks, bonds or other financial instruments.

Finally, derivatives represent financial instruments deriving their value from the evolution of another financial asset, such as a share or a currency for example. Derivatives generally include options, forward contracts and swaps.

Real estate assets

Real estate assets are properties. They can be bought or sold and have financial value. Real estate assets include houses, apartments, land and other properties.

Houses and apartments are dwellings intended to be occupied by people. These homes can be purchased to reside in or to be rented to third parties.

Lands are plots of land whose role lies in use for various purposes, such as construction, or cultivation of these lands.

Real estate assets are special because they are most often considered long-term assets since they tend to have a long lifespan and are not very volatile in the short term. For example, it is possible to use them to diversify a portfolio and as a source of passive income, particularly through rental.

Tangible assets

Tangible assets are material goods that can be bought or sold and have financial value. Tangible assets are characterised by equipment, machines, vehicles and other tangible assets.

Equipment includes any type of material used by a business, such as tools, production equipment or computers for example.

Machines are mechanical devices designed to accomplish a specific task.

Vehicles are means of transport: they include cars, trucks and planes.

Finally, tangible assets are generally used in the operation of a business. They can be sold to generate financial compensation when they are no longer used or are not needed. They can also be used to generate income, notably through rental or provision to third parties.

Intellectual assets

Intellectual assets are intellectual property rights that can be bought or sold and have financial value. Intellectual assets include patents, licenses, trademarks and other intellectual property rights.

Patents are exclusive rights granted by a government to a person or company in order to protect a creation for a limited period of time.

Licenses are agreements authorising a person or company to use an intellectual property right in return for a sum of money.

Marks are distinctive signs used to identify the products or services of a company. Trademarks are mainly words, sentences, logos or symbols.

In conclusion, intellectual assets are used to protect the innovations of a person or company. Intellectual assets can be sold or rented to other companies in exchange for financial consideration. It is also possible to use them to generate income. Take the example of licenses: these can be sold to other companies which will operate them independently.