Capital Asset

AAA

DEFINITION of 'Capital Asset'

A type of asset that is not easily sold in the regular course of a business's operations for cash and is generally owned for its role in contributing to the business's ability to generate profit. Furthermore, it is expected that the benefits gained from the asset will extend beyond a time span of one year. On a business's balance sheet, capital assets are represented by the property, plant and equipment figure.

VIDEO

Loading the player...

BREAKING DOWN 'Capital Asset'

Examples include land, buildings, machinery, etc. Generally, these are assets that cannot quickly be turned into cash and are often only liquidated in a worst-case scenario. For example, a company might look at selling a capital asset if it was looking at restructuring or the business was engaged in bankruptcy proceedings.

Depending on the business involved, capital assets may represent the majority of assets that are owned. For example, in equipment heavy operations such as oil exploration, it is not surprising to find the majority of a business's assets to be capital assets.

RELATED TERMS
  1. Real Estate

    Land plus anything on it, including buildings and natural resources.
  2. Capital

    1) Financial assets or the financial value of assets, such as ...
  3. Non-Core Assets

    Assets that are either not essential or simply no longer used ...
  4. Core Assets

    An essential, important or valuable property of a business without ...
  5. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  6. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
Related Articles
  1. Entrepreneurship

    Steps to Qualify For a Small Business Loan

    Learn steps to qualify for a small business loan such as identifying financing needs, preparing a business plan and getting required documents.
  2. Economics

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  3. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  4. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  5. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  6. Credit & Loans

    What's a Nonperforming Loan?

    A nonperforming loan is any borrowed sum where the borrower has failed to pay scheduled payments for at least 90 days.
  7. Economics

    Understanding Cost of Revenue

    The cost of revenue is the total costs a business incurs to manufacture and deliver a product or service.
  8. Economics

    Understanding Cash and Cash Equivalents

    Cash and cash equivalents are items that are either physical currency or liquid investments that can be immediately converted into cash.
  9. Economics

    Explaining Carrying Cost of Inventory

    The carrying cost of inventory is the cost a business pays for holding goods in stock.
  10. Investing

    How To Calculate Minority Interest

    Minority interest calculations require the use of minority shareholders’ percentage ownership of a subsidiary, after controlling interest is acquired.
RELATED FAQS
  1. What are typical forms of capital assets within a manufacturing company?

    Manufacturing companies heavily rely on their capital assets to generate revenues and profits. A capital asset can be tangible ... Read Full Answer >>
  2. Is goodwill considered a form of capital asset?

    Goodwill is an intangible asset of a company, and it is also considered to be a form of capital asset. Although it may be ... Read Full Answer >>
  3. Are capital assets normally immediately expensed or are they amortized/depreciated ...

    Capital assets are normally amortized or depreciated over the life of the asset since, by definition, capital assets are ... Read Full Answer >>
  4. Is intellectual property considered a form of capital asset within a company?

    Some kinds of intellectual property are considered capital assets and may be recorded on a company's balance sheet as intangible ... Read Full Answer >>
  5. Why should I dig further if I find a company has positive cash flow from investing ...

    A positive cash flow from investing activities could signal that a company is in financial trouble and is selling off its ... Read Full Answer >>
  6. What is the difference between a green field and a brown field investment?

    Green-field and brown-field investments are two different types of foreign direct investment, or FDI. Green-field investments ... Read Full Answer >>
  7. Why do we need a secondary market?

    In secondary markets, investors exchange with each other rather than with the issuing entity. Through massive series of independent ... Read Full Answer >>
  8. How do small firms record installment sales?

    Installment sales can be accounted for in a different manner than other types of business transactions, and the distinction ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  2. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  3. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  4. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  5. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  6. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!