Fixed assets are found at the top of a company balance sheet. The phrase covers all assets that the business intends to keep for more than a year. So these are operational assets, such as buildings, vehicles and machinery, rather than trading assets. Fixed assets can also be divided into ‘tangible’ (assets you can kick) and ‘intangible’ to cover other long-term assets, such as goodwill, patents and brands. Both types are written off against profits as they get used up or wear out. For tangibles, this is ‘depreciation’; for intangibles, ‘amortisation’. So if a firm buys a van for a salesman for £50,000, expected to make roughly equal amounts of revenue over five years, profits will be charged with £10,000 each year.
Vote for your favourite financial services companies in the inaugural MoneyWeek Awards, and you could win a year's subscription to MoneyWeek magazine. Find out more and vote here.
More from MoneyWeek
|How to buy and sell penny shares|
|A beginner's guide to investing in gold|
|How to invest in British fracking|