Operating assets are assets actively used in a business’s ongoing operation, including tangible items like equipment and intangible assets like copyrights. They help a company generate regular income, retire short-term debt, and are important to investors.
Sometimes referred to as working capital, operating assets are assets owned by a business that are actively used in the ongoing operation of the business. Assets of this type can be tangible items, such as equipment, or intangible assets, such as copyrights or trademarks. As long as the asset contributes to the generation of regular income for the business, it can be referred to as an operating asset.
When most people think of operating assets, the first thing that comes to mind is the physical property that houses the business. This can include the office space where the company’s business is run, as well as the plant that is used to manufacture the products sold by the business. Machinery that sits on the plant floor and is directly involved with creating products also qualifies as an operating asset. Office equipment that directly assists in revenue generation and collection is another type of operating asset.
Along with physical property, cash on hand is recognized as an operating asset. A company’s current accounts receivable balance is also considered essential to the continued operation of the business. Current assets of this type help provide the basis for retiring any current liabilities in a timely manner and help keep the company on solid financial footing, a factor that is very important to investors.
Intangible assets are also key operating assets of most companies. Assets that are classified as intellectual property are part of this group. Trademarks or copyrights owned by the company have a direct impact on the ability of the company to function. Similarly, assets like patents and brand recognition also play an important role in keeping the business going.
One of the functions of operating assets is to keep the company in a position where short-term debt retirement is possible, with short-term debt defined as any debt that must be paid in full within the next few twelve months. Investors often look at the total value of operating assets as a means of determining whether a company has what it needs to generate income that can pay off these obligations in the short term. If a company does not have sufficient operating assets, the investor is likely to view the company as a higher risk, even if the volume of earnings is reasonable and the stock is currently doing well.
Smart Asset.
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