Question

draw and describe the attributes of a perfect asset

Answer 1

Asset

Asset means any visible/invisible thing/right that is used to generate money. Assets are shown at one side of the balance sheet. Liabilities are the sources which helps buy assets. Assets are of mainly two types: Fixed and Current. Fixed assets means once purchased, they'll last for a long term and will generate income for a long time. Current assets are those which gets converted in to cash with in a year like debtors/short time investments etc.

Below are some attributes of a perfect asset:

1. Can be visible and Invisible: Assets can be in the form of visible and invisible. For example goodwill is an asset which is invisible and Building is an example of a visible asset.

2. Liabilities are the source: Liabilities are the sources which help to buy asset. The company collects money/funds in the form of liabilities and then invests in assets. For example share capital is a liability and the company buys Land from share capital's money is the asset.

3. Assets are used to generate Money/Capital: Assets like machinery, land & buildings are used to do daily operations of a company which results in its revenue.

4. Depreciation is Charged on Material and Visible Assets: Depreciation means the value of asset which gets reduced by its usage. It is charged on material assets like machinery/ land/ buildings.

5. Capital Budgeting Techniques used to buy Assets: A number of Financial techniques are available to calculate the worth and profitablity of investing in assets. Companies use these techniques to evaluate the worth of investing its money in different assets/projects and that project is chosen which provides the company with maximum benefits. Some examples are: NPV; IRR etc.

Conclusion

A Perfect asset is that asset which can generate revenue for a company. Every asset gets depreciated with the passage of time but a perfect assets generates more revenue than its cost to a company. So, in small words a perfect asset is that which can pay its worth to a company in minimum time.