what are hard assets?
A hard asset is a physical, valuable resource. Hard assets include consumer products, delivery vehicles, land, real estate, and commodities. Companies buy hard assets to boost output and income and protect soft assets. However, physical assets can lose value along with soft assets.
Understanding Hard Asset
Fixed, long-term hard assets help a corporation produce goods and services. Fixed assets last year. A company’s balance sheet lists hard assets like property, plants, and equipment.
Examples of hard assets:
- Buildings
- Vehicles like trucks or autos
- Equipment and machinery
- Workplace furnishings
- Machinery
Hard assets can also be short-term, often consumed within a year, known as current assets. Managing company assets, like inventory, might be complex. Hard assets for a machinery manufacturer include raw materials and inventories like machine components.
Payment for Hard Asset
Fixed-asset hard assets require senior management team capital investment choices. These investments need a sizeable monetary commitment and are long-term funding considerations. Banks, venture capital companies, corporate bonds, debt, and equity can fund significant hard assets. A corporation investing in a new manufacturing plant hopes to use it for years to produce money.
Value of Hard Assets
Generating or buying other products and services makes hard assets valuable. The corporation can sell them to earn cash in case of financial troubles. Hard assets contribute to a company’s inherent worth, according to experts.
Various methods analyze a company’s cash flow, assets, future revenue sources, and cost structure to calculate its intrinsic value. Companies are valued using hard assets because they may be sold for cash to pay off obligations, bondholders, and shareholders in financial trouble or liquidation.
Intangible vs. Hard Asset
Hard assets differ from intangible assets, which are non-physical and utilized long-term. Intangible assets include:
- A corporation brand
- Investments in securities
- Trademarks
- Patents
- Copyrights
- Franchises
Technology businesses have many intangible assets because of their product patents and research and development investments. However, oil corporations have oil rigs and drilling equipment.
Example of Hard Asset
Ford Motor Company (NYSE: F) is a US automaker that manufactures vehicles and trucks. The top management team wants new assembly line equipment. For rivets, the business will buy steel and aluminum. The equipment, steel, and aluminum are all hard assets.
Assembly machinery is durable. Due to their one-year usage, steel and aluminum raw materials are current assets. Additionally, equipment patents are considered intangible assets.
Conclusion
- An individual or corporation possesses a hard asset.
- Hard assets sometimes trade oppositely to soft assets, protecting against losses.
- Machinery and raw materials are examples of hard assets.
