A fixed asset is a long-term physical asset that a company uses in its business operations and is expected to benefit from over a period of time greater than one year. Fixed assets are typically used in the production of goods or services and may include items such as real estate, machinery, equipment, vehicles, and intellectual property.
Fixed assets are recorded on a company’s balance sheet as a long-term asset, along with current assets (such as cash and accounts receivable) and liabilities (such as debt and accounts payable). Fixed assets are typically financed through long-term debt or equity and are not expected to be sold or converted into cash within one year.
Fixed assets are important for businesses, as they enable companies to produce goods and services and generate revenue. However, fixed assets also require ongoing maintenance and may depreciate over time, which can impact a company’s financial performance. As such, it is important for businesses to carefully manage their fixed assets and to consider the costs and benefits of acquiring new fixed assets.