Academic journal article Journal of Accountancy

Creating Value with Tangible Assets

Academic journal article Journal of Accountancy

Creating Value with Tangible Assets

Article excerpt

Every company has tangible assets (computers, copiers and company cars, for example), but few companies use them to create shareholder value and increase cash flows and income. The more money a company has invested in these assets, the greater the impact asset visibility, knowledge and control will have on the bottom line.

Here are some things a company should consider when determining whether its assets are creating value:

* What is the status or condition of the tangible assets in the company's portfolio? Valuable assets may be idle because they are in disrepair or have been replaced. These assets should be repaired or redeployed within the organization so they can be put to better use. If the company has no use for them, it can sell them for cash or donate them for a tax deduction.

* Is the company using its assets efficiently? Employees or departments will often "squirrel away" shared assets that are in high demand to ensure they are available when they need them. This can lead a company to purchase and maintain excessive assets while others sit idle.

* Does the company experience redundant purchases of assets? This is a classic case of one hand not knowing what the other is doing. One department or employee may stop using an asset while another employee or department still needs that item. Unless the two parties have a means of communicating their needs, the company risks purchasing assets it already has. …

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