Tangible items is a term used in business when appraising the overall value of a company. Tangible items are those that have a physical existence, in contrast to “intangible” assets, such as a patent for specific products, company trademarks or “goodwill” relationships with suppliers and manufacturers, whereby discounted terms can be negotiated.
Typical examples of tangible items include office equipment, such as photocopiers and computers, land, share certificates or bank deposits. Tangible items can easily be appraised as having specific values which can easily translate into cash terms. “Intangible” items are undoubtedly valuable assets to a company, too, but they can’t be easily assessed in terms of financial value.
Items are separated into tangible and intangible categories for accounting purposes. A balance sheet will separately list items in each category so a company has a clear idea of its liquidity and ability to pay debts or raise cash. A firm with a high percentage of intangible assets is less likely to survive a financial crisis than one with tangible assets, as these can easily be sold off to raise cash in times of crisis.
Tangible items are easier to define in terms of monetary value, but this value does not stay consistent over time. For instance, a computer bought one year ago for $700 does not still have a value of $700. Higher spec computers are likely to be available one year later and at a lesser cost. The computer is also now second hand, meaning it wouldn’t hold its value regardless of cost changes in the computer industry. This change in value is known as depreciation and forms part of the accountancy calculations when assessing the value of tangible items.
Tangible items are neither better or worse than intangible items. Each can play an integral role in ensuring a business enjoys long-term success. For instance, having a specific brand name or company logo that consumers associate with integrity and financial value can have a hugely positive effect on selling products and growing a business. However, a trade mark in itself does not guarantee financial security. If the brand had negative press coverage because of a spate of complaints or hazards associated with the product, the “value” of having that trademark plummets. If the company didn’t have enough tangible assets to cover this drop in sales, it may well cease to trade. In contrast, a company with lots of tangible items but no reputable trademark that consumers trust may struggle to generate sales.