Tangible assets are the properties and resources a company owns that can be directly measured. Intangible assets can't be measured, but still have value, such as a strong brand or name recognition. When judging the value of a company, keep in mind the advantages and disadvantages of both kinds of assets. Tangible assets bring a company security, but intangible assets offer more potential for growth.
The Advantages of Tangible Assets
A company with a high value in tangible assets can always be liquidated and turned into cash. Businesses in higher-risk industries, such as banking and finance, use their tangible assets to reassure investors. As long as the value of the company's tangible assets exceeds the amount it's risking, it will remain secure. The more money you have, the more you can afford to risk.
The Disadvantages of Tangible Assets
In a free market, a business needs to differentiate itself from its competition. To do so, it needs to focus on what it does best particularly and what it possesses that no one else in its industry has. Compared with intangible assets, the disadvantage of tangible assets is that they're non-exclusive. Any company can possess the same tangible assets as any other. Tangible assets by themselves do little to maintain your customer base.
The Advantages of Intangible Assets
Intangible assets provide a company with its identity. Though there is no definite way to value intangible assets, they can be at least partially accounted for in financial terms. The amount a company must spend to gain new costumers should be reduced if it has an asset such as a strong brand name. Intangible assets are most valuable for their ability to aid a company in its growth and potential.
The Disadvantages of Intangible Assets
For intangible assets to have any value, a company must find a way to leverage them with an effective strategy. Often, the intangible assets of a company add to confusion over the company's direction. While assets such as an inspired work force and a popular brand name should give a company potential, they can also cause it to become overvalued. If there is no strategy to take advantage of a company's potential, it wont succeed.
- "New York Times"; Seeking Ways to Value Intangible Assets; Floyd Norris; May 2001
- The Motley Fool: The Significance of Book Value; Emil Lee; Nov. 8, 2006
- The Motley Fool: Bank Investing 101; John Howard; Feb. 23, 2007
- "Christian Science Monitor"; Personal Finance 101- What Is An Asset?; Trent Hamm; June 2011
- "Time Magazine"; Why China's Banks Are Stronger than America's; Cesar Bacani; June 2009
Casey Reader started writing freelance in 2010. His work appears on eHow, focusing on topics in history and culture. Aside from freelance work, Reader is actively pursuing a career in creative writing. He graduated from Centenary College of Louisiana with a Bachelor of the Arts in history and English literature.