Assets

Examples of Assets in the following topics:

• Return on Assets

  • The Return on Total Assets ratio measures how effectively a company uses its assets to generate its net income.
  • The Return on Total Assets ratio is similar to the Asset Turnover Ratio in that both measure how effective a business's assets are in generating returns for the business.
  • But while the asset turnover ratio is focused on the business's sales, return on assets is focused on net income.
  • You calculate the average value of the total assets by adding the value of the business's total assets at the beginning of the period and the value of the business's total assets at the end of the period.
  • $Return\quad on\quad Total\quad Fixed\quad Assets\quad =\quad \frac { Net\quad Income }{ Average\quad of\quad Fixed\quad Assets }$

• Assets

  • In financial accounting, assets are economic resources.
  • Simply stated, assets represent ownership of value that can be converted into cash (although cash itself is also considered an asset).
  • Two major classes are tangible assets and intangible assets .
  • Tangible assets contain various subclasses, including current and fixed assets.
  • Current assets include inventory, while fixed assets include such items as buildings and equipment.

• Return on Total Assets

  • The return on assets ratio (ROA) measures how effectively assets are being used for generating profit.
  • The return on assets ratio (ROA) is found by dividing net income by total assets.
  • Asset turnover is sales divided by total assets.
  • Second, the total assets are based on the carrying value of the assets, not the market value.
  • The return on assets ratio is net income divided by total assets.

• Total Assets Turnover Ratio

  • Total asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue.
  • Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover.
  • Total assets turnover = Net sales revenue / Average total assets
  • Tangible assets contain various subclasses, including current assets and fixed assets.
  • Current assets include inventory, while fixed assets include such items as buildings and equipment.

• Fixed Assets Turnover Ratio

  • Fixed-asset turnover is the ratio of sales to value of fixed assets, indicating how well the business uses fixed assets to generate sales.
  • Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is a term used in accounting for assets and property that cannot easily be converted into cash.
  • This can be compared with current assets, such as cash or bank accounts, which are described as liquid assets.
  • Fixed asset turnover = Net sales / Average net fixed assets
  • Fixed-asset turnover indicates how well the business is using its fixed assets to generate sales.

• Types of Long-Lived Assets

  • The two major asset classes are tangible assets (e.g., buildings and equipment) and intangible assets (e.g. copy rights).
  • There are two major types of long-term assets: tangible and non-tangible.
  • Tangible assets include fixed assets, such as buildings and equipment.
  • Fixed assets include asset land, buildings, machinery, furniture, tools, IT equipment-- e.g. laptops-- and certain limited resources-- e.g. timberland and minerals.
  • They are listed under the asset portion of the balance sheet.

• Defining Long-Lived Assets

  • Assets are economic resources.
  • Simply stated, assets represent value of ownership that can be converted into cash.
  • Assets represent probable present benefit, involving a capacity, solely, or in combination with other assets, to contribute directly or indirectly to future net cash flows, and, in the case of not-for-profit organizations, to provide services;
  • Since non-current, or long-lived, assets are expected to last for longer than one year, accounting treats long-lived assets differently according to their useful life.
  • When assets are expected to contribute to earnings for multiple years, such assets are referred to as long-lived, non-current or long-term assets.

• Loss Restoration

  • The cost model records an asset at its historical cost.
  • If an asset becomes impaired and an impairment loss results, the asset can fall under the revaluation model that allows periodic adjustments to the asset's book value.
  • The revaluation surplus account accounts for increases in asset value, and it also offsets any downward revisions, such as an impairment loss, in asset value.
  • After an asset have been revalued, the asset's depreciation expense must change to reflect the new value.
  • Explain when it would be applicable to revalue an impaired asset

• Asset Turnover Ratio

  • The asset turnover ratio is a measure of how well a business is using all of its assets to generate sales.
  • $Asset\quad Turnover\quad =\frac { Net\quad Sales\quad Revenue }{ Average\quad Total\quad Assets }$
  • The asset turnover ratio is a measure of how well a business is using all of its assets to generate sales.
  • The fixed-asset turnover ratio is calculated in a similar manner, except instead of focusing all of the business's assets, the ratio is calculated using the business's fixed assets.
  • The average fixed asset balance equals the beginning balance of fixed assets for the period plus the ending balance of fixed assets for the period, then dividing by two.

• Basic Components of Asset Valuation

  • Accountants record gifts of plant assets at fair market value to provide information on all assets owned by the company.
  • The reason for not using the book value of the old asset to value the new asset is that the asset being given up is often carried in the accounting records at historical cost.
  • The book value of a fixed asset asset is its recorded cost less accumulated depreciation.
  • An old asset's book value is usually not a valid indication of the new asset's fair market value.
  • Accountants record gifts of plant assets at fair market value to provide information on all assets owned by the company.