In many of our legal documents, we are required to define an asset. An asset does not have to be tangible; only tangible assets are assets. An asset may also be intangible, but this type of asset most often pertains to intangibles, such as knowledge, ideas, and even creativity. Many people are confused about what exactly an asset is, so the purpose of this article is to try and clear it up.
When discussing economic benefit, you are generally talking about the asset being worth more money than it would be worth if it were sold or written off. To know this, you must know what it is to be worth money. It can be something tangible that is owned outright, something held in trust, borrowed, produced, or acquired by you. It can also be something that someone else owns but is worth far less than it would be worth to you, so they owe you something in return.
Some people think that all assets are equal. However, they are not because some assets are valued more highly than others. There are two general categories of assets: fixed assets and variable assets. The characteristics of fixed assets are that they cannot be easily changed without losing ownership of that asset, and they are usually very reliable.
Fixed assets include your home, car, savings account, stock portfolio, and annuity. Typically, your fixed assets will not vary much because you have title to them, and you have a claim on them. Examples of fixed assets are real estate, accounts receivable, accounts payable, and accounts receivable. If you have control over a large portion of your current assets and current liabilities, that is considered a variable asset.
A variable asset is affected by market conditions. For example, if the dollar’s value increases for three months in a row, your assets would increase because they are based on how much the dollar is worth right now and not necessarily what it would be worth in the future. If the market value of your assets drops by 30%, your equity will drop. However, you could convert these assets to cash only if you sell most of your assets and stop earning dividends. Otherwise, you would continue to lose interest in the conversion.
All financial documents that you create for your business should list each of your unique assets and liabilities. This is an important part of creating your financial statement because it lists the value of all of your different assets and liabilities. When you create a balance sheet that lists all of your different assets and liabilities, you should also list the financial value of these assets and liabilities separately.
the balance sheet should also include a cash flow analysis. Cash flow describes how the assets and liabilities change over time. It can be negative or positive. The purpose of the cash flow analysis is to provide information about your cash flow and help you make decisions about the management of your cash. This is also used as a part of the selection process for determining which assets and liabilities should be included in your divorce settlement.
Some of the major factors that will affect the value of an asset are what it is being used for, the age of the asset, its cash flow value, and its fair market value. Fair market value can be found online, is an amount that would be equal to the asset’s market price minus the cost of any loans or other liens associated with it. The date of the last income tax return is also used as a negative fair market value. A current fair market value assessment determines the overall value of your asset. Many other things will affect the value, including the state of the economy and recent trends in the real estate or financial markets.