What is an asset?

By Jean Folger AAA
A:

An asset is anything of value that can be converted into cash. Assets are owned by individuals, businesses and governments. Examples of assets include:

  • Cash and cash equivalents – certificates of deposit, checking and savings accounts, money market accounts, physical cash, Treasury bills;
  • Real property – land and any structure that is permanently attached to it;
  • Personal property – everything that you own that is not real property such as boats, collectibles, household furnishings, jewelry, vehicles;
  • Investments – annuities, bonds, cash value of life insurance policies, mutual funds, pensions, retirement plans (IRA, 401(k), 403(b), etc.,) stocks and other investments.

Assets are often grouped into two broad categories: liquid assets and illiquid assets. A liquid asset is one that can be converted into cash quickly with little to no effect on the price received. For example, stocks, money market instruments and government bonds are liquid assets. Illiquid assets, on the other hand, are assets that cannot be converted into cash quickly without substantial loss in value. Examples of illiquid assets include houses, antiques and other collectibles.

Your net worth is calculated by subtracting your liabilities from your assets. Essentially, your assets are everything you own, and your liabilities are everything you owe. A positive net worth indicates that your assets are greater than your liabilities; a negative net worth signifies that your liabilities exceed your assets.

RELATED FAQS

  1. What are the differences between installment sales and credit sales?

    Determine the differences between credit sales and installment sales, which businesses often offer their customers for deferred ...
  2. When do you use installment sales method vs. the cost recovery method?

    Take a deeper look at the installment sales method and the cost recovery method of recognizing business sales revenue and ...
  3. What are the differences between operating expenses and SG&A?

    Learn what businesses mean when they list operating expenses or SG&A as line items on an income statement; understand how ...
  4. What are the differences between operating expenses and overhead expenses?

    Learn how operating expenses and overhead expenses affect profit margins; businesses are unique and different costs may fall ...
RELATED TERMS
  1. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
  2. Expanded Accounting Equation

    The expanded accounting equation is derived from the accounting ...
  3. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
  4. Billing Cycle

    The interval of time during which bills are prepared for goods ...
  5. Amortization

    1. The paying off of debt in regular installments over a period ...
  6. Price-To-Cash-Flow Ratio

    The ratio of a stock’s price to its cash flow per share. The ...
comments powered by Disqus
Related Articles
  1. Material Adverse Effect A Warning Sign ...
    Markets

    Material Adverse Effect A Warning Sign ...

  2. Footnotes: Early Warning Signs For Investors
    Retirement

    Footnotes: Early Warning Signs For Investors

  3. An Introduction To Depreciation
    Active Trading

    An Introduction To Depreciation

  4. 10 Sources Of Nontaxable Income
    Taxes

    10 Sources Of Nontaxable Income

  5. How To Calculate A Z-Score
    Markets

    How To Calculate A Z-Score

Trading Center