What is meant by tangible and intangible assets?
Tangible assets are the physical assets held by your business. Common examples are property, plant, machinery, IT equipment and motor vehicles. Intangible assets are assets which are not physical in nature but which nonetheless contribute to your company’s ability to generate revenue. Common examples of intangible assets are patents, copyright, brands, customer relationships and software technology.
Why is it important that you understand the tangible and intangible assets held by the company?
Having an understanding of the assets used to drive company profitability is important for a number of reasons. Firstly it will help you to articulate the value generated by your business and why this could be attractive to a potential purchaser. Secondly when it comes to undertaking a transaction, a prospective buyer will undertake a full diligence exercise on the assets of the business being bought. Being prepared in advance for the rigour of a diligence exercise is advantageous.