What Are Long-term Assets

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• Long-term assets (fixed assets)

Back to glossary Definition Long-term assets (fixed assets) Long-term assets are resources or property a company expects to provide economic value for more than one year, such as equipment, real estate, or investments.

Long-term assets (also called fixed or capital assets) are those a business can expect to use, replace and/or convert to cash beyond the normal operating cycle of at least 12 months. Often they are used for years. This distinguishes them from current assets, which companies typically expend within 12 months. Because they are harder to convert to cash than current assets, they are often referred to as illiquid assets.

Long-term assets appear on the balance sheet along with current assets. Together they represent everything a company owns. The portion of long-term assets consumed each year appears on the income statement for that period, either as amortization expenses for tangible and intangible assets, or as depletion expenses for natural resources.

Companies periodically refurbish or replace long-term assets by taking on debt and/or raising equity capital. Matching long-term debt to sustain assets is a common business practice.

More about long-term assets

The balance sheet below shows that ABC Co. owned $180,000 in long-term assets as of March 31, 2012. With $130,000 in long-term liabilities, the company had $1.40 in long-term assets for every $1 in long-term debt; this is a healthy balance.

Related definitions

Cash

Cash refers to the money a business has at its disposal, either on hand or in easily-accessible bank accounts. Read more

Liabilities

Liabilities are financial obligations or debts a company owes to another party, typically due within a certain timeframe. Read more

Working capital

Working capital is the amount of cash and other current assets a business has available after all its current liabilities are accounted for. Read more

Current assets

Current assets are assets a business expects to convert into cash or use up within a year. Read more Didn’t find what you were looking for? Back to glossary