What are business assets? How to manage assets most effectively?

Corporate assets include not only tangible elements such as machinery or real estate, but also intangible assets such as brands and patents. Effective asset management is the key to helping businesses optimize profits and ensure sustainable development.

1. What are corporate assets?

Corporate assets are a concept that encompasses everything a business owns or controls, with the purpose of creating economic value. According to Article 105 of the 2015 Civil Code, assets are defined as objects, money, valuable papers and other property rights. In business, this asset can be real estate or personal property, and can include both existing assets or assets formed in the future.

More specifically, the assets of a business can include: cash, securities, headquarters, factories, construction works, machinery and equipment, stores, warehouses, goods, raw materials, fuel, supplies, trade names, signs, trademarks, customer networks, etc.

2. What is the property of a legal entity?

The property of a legal entity is the private property owned by the legal entity or assigned to the legal entity for management.

Characteristics of legal entity property:

• Independence of ownership:
• The property of a legal entity is completely independent of the property of the members of the legal entity.
• This property is also independent of the property of the superior agency of the legal entity and other organizations.
• Rights to manage and use:
• The legal entity has the right to manage, use and dispose of its property in accordance with the provisions of law and the organization’s charter.
• Clear legality:
• The assets of a legal entity are recorded and protected according to the provisions of law, creating transparency and clarity in business and management activities.

Concept and classification of assets of a unit

The assets of a unit are all economic resources that the unit is holding and using for its operations. These assets simultaneously satisfy the following conditions: the unit has the right to own or control and use the asset for a long time, the asset has a clearly defined value, and it is certain that future economic benefits will be obtained from the use of this resource.

The unit’s assets can be classified as follows:

• Fixed assets include buildings, machinery, equipment, warehouses and means of transport. Raw materials include main materials, auxiliary materials and fuel. Tools and instruments are types of tools and instruments serving the unit’s operations. Goods and finished products include finished products and inventories.
• Cash is cash available for use, while bank deposits are deposits at banks. Securities include securities such as stocks and bonds. Receivables include receivables from customers, advances, internal receivables and other receivables.
• Finally, intangible fixed assets include issuance rights, patents, inventions, trademarks, trade names, software programs and land use rights.

The assets of the unit include all economic resources that the unit controls and uses, have a definite value and bring economic benefits in the future. Asset classification helps to effectively manage and exploit these resources, thereby supporting the operation and sustainable development of the unit.

3. Types of business assets

Based on the life cycle of the assets, from the time of investment, planning to purchase assets until the time of purchasing assets, distributing and putting assets into use, circulating, recovering, and liquidating. The assets of the enterprise will be divided into 2 types: short-term assets and long-term assets.

3.1. What are short-term assets?

The short-term assets of a business are assets with a short usage time or payback period, usually within 12 months or within a business cycle. These assets often have relatively low usage value and are often converted or consumed during the production and business process. Effective management of current assets helps ensure the solvency and profitability of the business, as well as avoid wasting resources.

Forms of current assets include:

• Cash capital: This is cash including Vietnamese currency, foreign currency, bank deposits, circulating money and equivalents such as gold, silver, precious stones, and other precious metals.
• Short-term financial investments: These are investments outside the enterprise with the purpose of making a profit in a short period of time, usually within a business cycle. This type of asset includes short-term securities, other short-term investments, and provisions for short-term investments to offset losses in long-term investments due to risks such as bankruptcy, natural disasters, or floods.
• Inventories: These are assets that the enterprise uses in the production and business process or sells in the short-term business cycle. Inventories include raw materials, supplies, tools, unfinished production costs, finished products, goods, and goods in the enterprise’s bonded warehouse.
• Short-term receivables: These are amounts that the enterprise has the right to collect from customers or other related parties due to business transactions. These amounts include receivables from customers, internal receivables, VAT to be collected, and other receivables. Enterprises need to closely manage these amounts to ensure that they are not misappropriated or lost.
• Other short-term assets: Include the value of short-term mortgages, advances, deposits, and prepaid expenses.

3.2. What are long-term assets?

Long-term assets are assets that have a long-term use period, exceeding 12 months, and are used through many business cycles of the enterprise. These assets have great value and high stability, rarely changing in value during the use process. They include a series of physical and non-physical assets that the enterprise invests in to support long-term production and business activities.

Types of long-term assets include:

• Fixed assets: These are large assets, used continuously in many production or business cycles and tend to wear out over time. Fixed assets are divided into two main groups:
• Tangible fixed assets: Include assets such as buildings, machinery, equipment, and means of transport. To be classified as tangible fixed assets, they must have an original cost of VND 30,000,000 or more, a usage period of more than one year, and must bring economic benefits from use.
• Intangible fixed assets: Include assets that do not have a physical form such as patents, land use rights, computer software, and copyrights. These assets also need to satisfy certain conditions regarding investment value and costs incurred to be recognized as intangible fixed assets.
• Long-term receivables: Are amounts that an enterprise has the right to collect from business partners or customers over a period of more than 12 months. These amounts may include long-term receivables from customers, long-term internal receivables, working capital at affiliated units, and long-term loans.
• Long-term financial investments: These are investments that an enterprise makes in subsidiaries, associates or joint ventures, with the goal of long-term investment to generate profits. These investments usually exceed a period of one year and may include long-term securities. Enterprises also need to make provisions for depreciation for these investments to reflect fluctuations in value due to market or other external factors.
• Investment real estate: This type of asset includes real estate such as houses and land owned or held by enterprises for the purpose of generating profits, through leasing or investing in anticipation of price increases for sale. The difference between investment real estate and fixed assets is that they are not used directly in the production or supply of goods of the enterprise.
• Other long-term assets: Includes a series of other assets with a use or recovery period of more than one year at the time of reporting. Examples of this type of asset include work in progress, construction in progress, long-term prepaid expenses, deferred tax assets, and long-term deposits and pledges.

4. Sources of capital of the enterprise

4.1. Concept of capital source

Capital source is the source of the assets of the enterprise. It shows the assets of the enterpriseWhere is the enterprise formed from and the enterprise must have economic and legal responsibilities for its assets.

4.2. Classification of enterprise capital sources

Equity sources of enterprise include two main types: equity and liabilities.

Equity is the capital contributed by the owners, the unit does not have to commit to repaying debts. Depending on the form of ownership, the owner’s capital can be provided by the State, contributed by shareholders or members, received from joint ventures, or invested by private business owners or LLC owners.

The owner’s capital is divided into the following items:

• The owner’s investment capital: The initial or additional capital contributed by the owners.
• Undistributed profits: The part of after-tax profits that has not been divided or used for other purposes.
• Specialized funds: Including development investment funds, reward and welfare funds, and capital for basic construction investment.

Classifying and managing owner’s capital helps businesses Understand the financial situation, ensure stability and sustainable development in business operations.