Financial modelling terms explained

Fixed Assets

Fixed assets is an accounting term that refers to assets that a company owns and uses in its business operations over a period of time. Examples of fixed assets are factories, buildings, land, and certain types of machinery and equipment.

What Are Fixed Assets?

Fixed assets are long-term, tangible assets used in a company's operations that are not expected to be converted to cash within one year. They are recorded on a company's balance sheet at their cost, less accumulated depreciation. Examples of fixed assets include land, buildings, equipment, and vehicles.

How Do You Calculate Fixed Assets?

There are a few steps involved in calculating fixed assets. The first step is to determine the book value of the fixed assets. This is done by subtracting the accumulated depreciation from the original cost of the asset. The second step is to calculate the depreciation expense for the current period. This is done by multiplying the depreciation rate by the book value of the fixed asset. The third step is to subtract the depreciation expense from the operating income. This will give you the net income from the fixed assets.

What's the Difference Between Fixed Assets and Current Assets?

Fixed assets represent long-term investments in a company, such as land, buildings, or equipment. They are not as liquid as current assets, meaning they cannot be converted into cash as quickly. Current assets, on the other hand, are assets that can be converted into cash within a year, such as cash, accounts receivable, and inventory.

What Are Some Examples of Fixed Assets?

Fixed assets are long-term physical assets used in a business, such as land, buildings, equipment, and patents. They are often referred to as property, plant, and equipment (PP&E). The cost of fixed assets is usually capitalized, which means it is recorded as an asset on the company's balance sheet and then amortized (or depreciated) over its useful life. This reduces the company's income statement expenses and, in turn, its taxable income.

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