What are fixed assets?

Fixed assets are defined as long-term tangible assets that are used in a company's operations to produce goods or services and that are not intended for sale in the ordinary course of business. These assets are essential for a company's manufacturing processes or business activities. Common examples include machinery, buildings, land, and vehicles.

The defining characteristic of fixed assets is their longevity; they typically have a useful life extending beyond one year, facilitating ongoing production rather than being converted to cash or consumed within a short period. This contrasts with other options like cash reserves, which are liquid and short-term, or inventory, which consists of goods intended for sale within a year. Temporary investments also do not qualify as fixed assets as they are not used directly in daily operations for production. Overall, fixed assets play a crucial role in supporting a company's operational capabilities and long-term financial health.