A:

Fixed assets are long-term, tangible assets such as land, equipment, buildings, furniture and vehicles. Fixed assets are parts of the company that help with production and are components that last over time in the company. They are physical assets that can be seen. They are not used for liquidation purposes to contain debt within a business or cashed out in any way to aid a business financially.

Current assets are the general inventory of a company, including cash, accounts receivable, insurance claims, investments, and intangible or non-physical items. Current assets account for the worth of a company, showing the earnings-to-debt ratio by the year's end. Each current asset has the ability to be cashed out to financially help the business or liquidated to save the company from debt or bankruptcy.

Fixed and current assets are recorded on a balance sheet, which is a statement showing the worth of a company at a certain point in time. The balance sheet shows the company's spending habits and inventory compared to its income. This helps the company determine where to cut back expenses and how to plan future budgets.

The three main categories to fill out on a balance sheet are assets, liabilities and owner's equity. The assets are the fixed and current assets. Liabilities are items causing debt to the company, and equity is the value of shares issued by a company. Each balance sheet is filled out annually so that potential investors or banks know if the company as a whole is a liability or investment opportunity.

RELATED FAQS
  1. Are current assets liquid or capital?

    Take a deeper look at liquid current assets for businesses and individuals, and learn how they differ from other types of ... Read Answer >>
  2. What is the difference between tangible and intangible assets?

    Tangible assets are physical assets such as land, vehicles, equipment, machinery, furniture, inventory, stock, bonds and ... Read Answer >>
  3. What is the fixed asset turnover ratio and why is it important?

    Learn about the fixed asset turnover ratio and how this calculation is used to analyze how efficiently a company uses its ... Read Answer >>
  4. Does the balance sheet always balance?

    Yes, a balance sheet should always balance. The name "balance sheet" is based on the fact that assets will equal liabilities ... Read Answer >>
  5. What is the difference between a balance sheet and a cash flow statement?

    Understand the difference between a balance sheet and an income statement. Learn the three components of each of the financial ... Read Answer >>
Related Articles
  1. Investing

    Reading the Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  2. Managing Wealth

    What's an Asset?

    An asset is a resource with economic value.
  3. Investing

    How to Evaluate a Company's Balance Sheet

    Asset performance shows how what a company owes and owns affects its investment quality.
  4. Investing

    5 Tips For Reading A Balance Sheet

    If you know how to read it, the balance sheet provides valuable information on a potential investment.
  5. Investing

    Reviewing Assets On The Balance Sheet

    A firm uses its assets to generate sales and bottom-line profits for shareholders. A healthy company will continually grow its assets, which stems from leftover profits that are reinvested back ...
  6. Managing Wealth

    Current Assets

    Current assets are all of the assets a company uses to fund its daily operations. These are the assets the company could convert into cash within a year in the normal course of business.
  7. Investing

    How To Read Apple's Balance Sheet

    We explain how to find, read, and analyze a balance sheet from Apple.
  8. Investing

    Reviewing Liabilities On The Balance Sheet

    As an experienced or new analyst, liabilities tell a deep story of how a company finances, plans and accounts for money it will need to pay at a future date.
  9. Personal Finance

    How To Improve Net Worth By Decreasing Liabilities

    Here's an analysis of how to adjust liabilities and assets to improve net worth.
RELATED TERMS
  1. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses ...
  2. Permanent Current Asset

    The minimum amount of current assets a company needs to continue ...
  3. Off Balance Sheet - OBS

    An asset or debt that does not appear on a company's balance ...
  4. Physical Asset

    An item of economic, commercial or exchange value that has a ...
  5. Active Asset

    An asset that is used by a business in its daily or routine operations. ...
  6. Shareholders' Equity

    A firm's total assets minus its total liabilities. Equivalently, ...
Hot Definitions
  1. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  2. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
  3. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  4. Solvency

    The ability of a company to meet its long-term financial obligations. Solvency is essential to staying in business, but a ...
  5. Dilution

    A reduction in the ownership percentage of a share of stock caused by the issuance of new stock. Dilution can also occur ...
  6. Agency Problem

    A conflict of interest inherent in any relationship where one party is expected to act in another's best interests. The problem ...
Trading Center