Fixed assets are essential items a company owns and uses for more than a year, including real estate, machinery, and other equipment vital for operations.
Classified as non-current assets, fixed assets cannot be easily converted to cash, distinguishing them from current assets like cash and inventory, which are expected to be used or sold within a year.
The depreciation of fixed assets creates challenges on a balance sheet, as the value can fluctuate drastically from year to year, affecting a company's book value.
The classification of fixed assets may differ by industry; what is a fixed asset for one business might be a current asset for another, showing the importance of context.
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