Capital Asset

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What is a 'Capital Asset'

A capital asset is 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.

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.

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