Tangible assets are physical and tangible assets of a company. They have an economic value and are used in business operations, resold or held as a long-term investment.
In German, ‘tangible assets’ are often referred to as tangible assets is referred to as. These include, for example:
- Machinery and production facilities
- Buildings and land
- Vehicles
- Office and business supplies
- Computers and technical equipment
- Tools
- Raw materials and stock levels
- physical products in stock
Tangible assets can generally be divided into current and non-current assets:
| Category | Meaning | Examples |
| Current tangible assets | are to be sold or used up within a reasonable period of time | Stock levels, raw materials, finished products |
| Non-current tangible assets | are used on a permanent basis for business operations | Machinery, buildings, vehicles, technical installations |
Long-term tangible assets are often referred to as Property, plant and equipment . As they are subject to wear and tear due to use, age or technological progress, their value is usually depreciated over several years in the balance sheet.
A simplified example:
A start-up buys a production machine for 100,000 euros and plans to use it for ten years. Under the straight-line depreciation method, 10,000 euros would be recognised as depreciation each year.
Tangible assets are important to businesses for a number of reasons, including the fact that they:
- required for production and business operations
- represent a measurable corporate value
- be taken into account when making investment decisions
- can serve as security for loans
- influence the cost structure and capital planning
- to be shown in the balance sheet
Tangible assets are particularly relevant for companies in sectors such as:
- Manufacturing and Industry
- Hardware and Robotics
- Logistics and Mobility
- Medical technology
- Energy and Environmental Technology
- Retail
- Construction and Property
Digital start-ups often have fewer tangible assets than manufacturing companies. In the case of software or platform companies, a large proportion of the company’s value often consists of intangible assets such as software, data, brands, patents or expertise.
Put simply, the difference can be explained as follows:
| Tangible assets | Intangible assets |
| physically tangible | not physically tangible |
| Examples: machinery, vehicles, buildings | Examples: patents, trade marks, software, licences |
| Value can often be determined on the basis of acquisition costs | Assessment, which is often complex |
| may, in some cases, serve as collateral for a loan | can only be used as collateral to a limited extent |
| frequent depreciation due to use and wear and tear | often depreciation or impairment testing, depending on the type |
The actual economic value of a tangible asset does not necessarily have to remain at the original purchase price indefinitely. It may change as a result of:
- Wear and tear
- technological progress
- Damage
- changing market prices
- falling demand
- high maintenance or operating costs
For start-ups, substantial tangible assets can present both advantages and challenges.
Possible benefits include:
- in-house production or development capabilities
- less reliance on external providers
- physical collateral for financing
- Control over quality and delivery capability
Possible challenges include:
- high capital requirements
- ongoing maintenance and operating costs
- less financial flexibility
- Impairment and depreciation
- Warehousing and insurance costs
- The risk of unused capacity
A common mistake is to consider only the initial purchase costs. Start-up founders should also take into account maintenance, repairs, energy consumption, insurance, storage and a possible future sale.
innoWerft helps start-up founders to realistically assess their investment requirements and cost structures, to incorporate tangible assets into their financial planning, and to present their capital requirements for product development, production and growth in a way that is transparent to investors and other funders.