Any business needs assets and resources to carry out operations. Some of these resources are intangible, like goodwill and entrepreneurship, but all other resources are tangible. Tangible means such resources that can be seen, touched or felt. It is these tangible resources that are mainly utilized by businesses to produce output and earn profits.
Land is the primary tangible resource of a business. Land is any piece of property or any premises that is used by the business to carry on production. Land can mean an actual piece of land where agriculture is carried out if the business related to agro-products, such as fresh juice, jams or jellies made out of farm produce. Land might also mean the premises within which a factory is situated or even where an office is situated. It is one of the most vital tangible resources that are necessary for a business to operate.
Labor is another tangible resource that is required to carry out any form of production. Labor is the tangible asset that operates machines that generate output and provide profit to businesses. Labor can be of various types. While unskilled labor might be appropriate for manual operations, highly skilled labor is necessary to operate sophisticated machines that generate precision output. Such a skilled labor force is much in demand in precision industries as it is rather difficult to obtain enough of such skilled workers. It also must be mentioned that when we talk of labor we mean all those individuals that are involved in the production process and it includes everybody; right from the machine operator to the highly qualified production manager. Economics never differentiates between organizational status and position of an individual. As long as that individual provides service to the organization, they are considered as labor.
Capital is the source of finance for a business and without capital a business would be unable to procure either machines or premises or even be able to bear initial expenses that are necessary before a business starts earning profits that helps it to sustain itself. Capital is provided by the owners who might be a sole proprietor, a partner or even a shareholder in a joint stock company. As the capital belongs to the owner, it is a liability of the business and it must ensure proper return to the owners so that they remain interested in the current line of business. If the business is unable to generate satisfactory returns, owners may withdraw their capital and invest in some other more profitable line of business. This would, quite obviously, signal the demise of the business. Hence, any business must be extremely careful and cautious as to how the available capital is utilized.
The other important tangible resources for a business firm are the raw material, semi-finished goods and finished goods it has at its disposal. While stock-out situations may lead production stoppage or loss of sale or even ceding market share to competitors, any unnecessary stockpiling of inventory would also lead to unwarranted blockages of capital that might prove to be very costly for the firm. Hence, every management monitors stock levels at all stages of production to ensure that a business firm carries only optimum level of inventory.
- Jupiterimages/Photos.com/Getty Images