Welcome to the Wealth Scribbles Series, providing you with the basics about a variety of important wealth topics so you can be more confident in your financial knowledge.
Having previously introduced the Balance Sheet, it’s time to review its first component – Assets.
Assets are anything you or a company or even government own. Think real estate, bank accounts, inventory, investments and so on.
You may see Assets on a financial statement divided into Current Assets and Non-Current Assets. The main difference is how quickly one can convert the asset into cash. Current Assets are the ones you can and very likely will convert to cash within one year. For example, your stock market investments would likely be listed as Current Assets.
Extending out longer term, Non-Current Assets are those that are not easily converted into cash and can take more than a year to sell, if and when the time came. An art collection is considered a Non-Current Asset. Though it does have value, it will take a lot of time and effort to properly appraise it and find a willing buyer to purchase it at a fair and agreeable price.
On a corporate balance sheet, Current Assets are such things as a company’s inventory of goods on hand, ready for sale, as there’s a high likelihood the inventory will be sold in a given year. On the other hand, a corporate Non-Current Asset might be a company owned warehouse, which would very likely take more than one year to sell and liquidate into cash.
Assets can also be categorized in another way, identifying them as either Tangible or Intangible. Tangible Assets are those that can be touched – such as a vehicle or building, while Intangible Assets refer to that which is not of this physical world – such as intellectual property. These distinctions are normally used in the corporate financial world, and not in personal finance.
When it comes to personal assets, Pinnacle Sovereign Wealth uses a system for clients that helps drive wealth growth through the proper asset channels because not all assets are created equally.
Regardless of whether we’re studying assets owned by private individuals, public companies or governments, it helps to understand assets to be able to identify what the entity owns generates financial returns and value to the community. Without assets, income would be difficult to generate, expenses not covered and hence putting significant stress on the entity.
But that’s it for now with this quick introduction to Assets. I trust you found this brief intro on asset helpful. If you have questions or would like further guidance on financial matters, feel free to send us a note through the Contact section and we’ll gladly help you out.
Together to self-ownership and happiness so we can win at life,
Adrian