What is an Asset in Business?
Many people have the wrong idea about what is an asset in business. They are under the impression that assets in business are just things like cash and cars that businesses buy for use. However, assets in business do much more than this. They are assets for their own sake and not for the purpose of earning money. Assets are all about how the firm owns and uses them.
First, an asset in business is not just anything that you happen to own. An asset is something that you have a legal claim to and you use it in order to earn income from it. These assets can be things like goodwill, products and property, and non-physical assets like computers and office stationery. But whatever the assets are, they should be used for the benefit of the business. Otherwise, these assets will not be called business assets but merely personal ones.
Second, the ownership of assets in business means that you own a part of a firm in which you transact your activities. The value of your shares of stock in the firm is what is considered to be the value of the firm. But you can always sell your stocks at a profit to yourself or to others. Your stake in the firm’s value does not determine your actual worth. What is important is how much you can help the firm make profits. You are an asset only in proportion to the amount of profit your firm brings in.
Third, assets in business are not just any thing that you can grab up today and resell at a profit. Instead, they are things that are tied to the success of your business venture. For example, a businessman can acquire real estate property today and sell it when he wants to do so in future. But real estate property is not something that is easily bought or sold. It is something that is owned by someone and is instrumental to the success of a business enterprise.
Another type of assets are patents. A patent is something that is issued by the government to an inventor so that he can protect his idea from competition. So the inventor will have a legal right to protect his inventions from another person who might come up with an idea similar to his. The inventor may sue the other person if he thinks that he has a right to such protection.
Some firms own raw lands and build houses on them. These are assets because they are used for the firm’s daily operations. Other assets are rights to use the plants or other assets. Examples of these include motor vehicles, livestock, and trademarks.
A firm cannot hold title to its own assets. When a firm owns real estate or other assets, it owns the assets permanently and is allowed to use them according to contract. This is one advantage of having an asset in business. A firm can access its assets whenever it needs them. But it also has disadvantages as well.
Usually, when what is an asset in business? is asked, entrepreneurs are quick to say that their firm is the most important asset. And they would like to hold on to it as long as possible. But this kind of asset, even if it is very important, cannot be held onto forever, especially if the firm is going through economic crisis.
If you buy an asset, the owner usually gives you a lien over his property. However, this does not mean that you can just take this without paying anything. You may have to go through legal troubles, or use force to secure the asset. For example, if the firm is involved in a lawsuit, the owner may sue you and try to recover his money.
In addition, the assets of a firm may be sold in order to pay debts. However, this sale does not mean that you do not owe anything. You may only have to pay the selling price less the outstanding debt. This is why, in the words of an attorney, “an asset is a legally defined group of things that can be sold in order to repay debt.” In some cases, however, the sale of assets may be required in order to service a loan. Also, the value of the asset may differ from time to time, depending on the value of the firm’s assets and the fortunes it may have brought in the past.
You should now understand what is an asset in business? If you take good care of your personal assets, you will be able to increase your chances of success in business. It is important that you choose assets wisely, in order to maximize your potential returns. Remember, in the business world, assets are one of the most important factors that determine the firm’s future success.