Corporate executive rely on assets to boost productivity in the short- and long-terms. Senior leaders analyze the economic environment domestically and internationally, evaluating how best to use corporate assets in operating activities. Asset-management procedures help a company leverage its resources to grow and outmatch the competition, especially when it comes to engaging in long-term expansion plans.
Corporate assets are resources that a company relies on to operate, thrive and expand. Accounting norms allow a firm to count as assets resources that it owns and those over which it has future ownership rights. Asset analysis and management requires logistical acumen, financial expertise and attention to detail. Consequently, companies often hire specialists, such as certified financial managers, to provide guidance in asset-management activities.
Generally accepted accounting principles and international financial reporting standards require that firms distinguish short-term assets from long-term resources. Short-term assets are also known as current assets and serve in a company's operating activities for less than one year. Examples include cash, inventories and accounts receivable. Long-term resources are otherwise called tangible, capital or fixed assets. Tangible assets serve in operating activities for a period that exceeds 12 months. Examples include real estate, equipment, machinery and manufacturing processes.
Corporate assets provide the economic lifeblood that keeps companies financially afloat. Investors and the public view firms that have substantial resources as more economically solid than companies with fewer assets. Corporate financiers, such as lenders, suppliers and shareholders, also view favorably a firm that possesses significant resources.
To record an asset purchase, a corporate accountant debits the asset account and credits the cash or vendor payables account, depending on whether the transaction is a cash or credit purchase. Vendor payables, a liability account, may be short-term or long-term, depending on the loan maturity. In accounting terminology, crediting an asset account, such as cash, means reducing its amount. This is distinct from the banking concept.
Financial Reporting and Analysis
Corporate accountants report assets in the balance sheet, also known as a statement of financial position or statement of financial condition. Other corporate accounting summaries include a statement of shareholders' equity, a statement of cash flows and a statement of profit and loss. Financial analysts assess a company's assets through numerical indicators called ratios. Asset-related financial ratios include working capital and asset turnover ratio. Working capital equals current assets minus current liabilities and an evaluation of a firm's cash available in the short-term. Asset turnover ratio indicates how efficiently a company uses its fixed assets to generate sales. The ratio equals sales divided by fixed assets.
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