Total assets

Total assets refers to the total amount of assets owned by a person or entity. Assets are items of economic value, which are expended over time to yield a benefit for the owner. If the owner is a business, these assets are usually recorded in the accounting records and appear in the balance sheet of the business. Typical categories in which these assets may be found include:

Depending on the applicable accounting standards, the assets that comprise the total assets category may or may not be recorded at their current market values. In general, international financial reporting standards are more amenable to stating assets at their current market values, while generally accepted accounting principles are less likely to allow such a restatement.

Owners may look at their total assets in regard to which can be converted most quickly into cash. An asset is said to be more liquid if it can be readily sold for cash, and illiquid if this is not the case. The liquidity concept is also used for the presentation of assets within the balance sheet, with the most liquid items (such as cash) listed at the top and the least liquid (such as fixed assets) listed closer to the bottom. This order of liquidity appears in the preceding bullet point list of assets.

Assets are also classified on the balance sheet as either current assets or long-term assets. A current asset, such as an account receivable or marketable security, is expected to be liquidated within one year. A long-term asset, such as a fixed asset, is expected to be liquidated in more than one year.

A potential acquirer will pay particular attention to the various types of assets listed on the balance sheet of a target company. The emphasis will be on judging whether the asset value stated on the balance sheet corresponds to the actual value of an asset, or if there are significant differences. If the actual value is lower, the acquirer will likely reduce the size of its bid. If an asset has a higher value, the acquirer will have greater interest in acquiring the business, and so may increase its offer price.

Related Courses

Bookkeeper Education Bundle 
Bookkeeping Guidebook 
The Balance Sheet