Investor Education Story

Financial Indicator

Macroaxis News
  
By Nathan Young

May 23, 2017

Total assets are interesting because not every company has the same under the category. Total assets are a culmination of all tangible and intangible assets, giving you a nice number to then go forward researching.

Total Asset

Each company may have completely different assets as a manufacturing company has many physical assets such as machinery, while a consulting firm has intangible assets and that could be IP or intellectual properties. Total assets when it comes to banks is different because assets with a bank are loans for cars all the way to large business loans.




Total assets is something you have to take a look at individually because it may not be the best to compare them across the board. Rather, you should look at assets in a financial light, with an example being if the company needs to liquidate or sell, what would be the return investors would receive after all the lien holders are paid off first.

Assets are essential to many businesses and it is important to understand what the majority of them do. If you are watching a manufacturing company and you noticed the assets number jumped a large percentage, that could have been from an investment in assets that help the company grow cash flow. Really understanding the investments you make are crucial because you can put yourself in managements shoes and hopefully understand their reasoning behind moves.

Going to back to liquidity, you have to understand that many of these tools are unique to this particular business, which means if they have to sell off all they have, it may be difficult to sell the physical assets of the company. With that being said, you wouldn’t want to invest in a company that is on the verge of failing anyways.

Be sure to fully understand how total assets can help with your fundamental research, because it can come in handy with some ratios. Ratios are something you can typically compare across the board, allowing you to find which companies are creating the most value. If you get stuck, reach out to an investing and trading community as they can help to guide you in the right direction and provide examples of how they may be using total assets in their research. Test this out and see if it complements your current setup, if not, at least you have the knowledge going forward to hopefully help you out in other areas of finance and investing.

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