Stock Charted
Glossary

Fixed Asset

A fixed asset is a long-term tangible item a business owns and uses to produce goods or services, such as property, machinery, or equipment, rather than selling it in the normal course of business.

What Is a Fixed Asset?

A fixed asset is a physical resource that a company holds for more than one accounting period and uses in its operations. Examples include land, buildings, factory machinery, vehicles, computers, and office furniture. Because these items help generate revenue over several years, they appear on the balance sheet under non-current assets rather than as current assets such as inventory or cash.

Fixed assets are sometimes called property, plant, and equipment (PP&E), a term many companies use in their financial statements.

How Fixed Assets Are Accounted For

When a company buys a fixed asset, it records the cost on the balance sheet rather than expensing the full amount right away. Over time, most fixed assets wear out or lose value, so the company spreads the cost across the asset's useful life through depreciation. Each year, a portion of the cost moves from the balance sheet to the income statement as an expense. Land is an exception, because it generally does not wear out and is therefore not depreciated.

A simple way to think about a fixed asset's book value is:

Book Value = Original Cost - Accumulated Depreciation

Book value is the figure reported on the balance sheet. It is not necessarily what the asset could sell for, which may be higher or lower.

Why Fixed Assets Matter to Investors

Fixed asset levels help show how much a company has invested in its productive capacity. Capital-intensive industries such as utilities, airlines, manufacturing, and telecommunications typically hold large amounts of fixed assets. Investors often look at capital expenditures to see whether a company is spending on new equipment or facilities, and at return on assets to judge how efficiently those assets generate profit.

Fixed assets also carry risks. Heavy investment can mean high fixed costs and significant debt, and assets may become obsolete faster than expected. Reviewing a company's depreciation policies and asset impairment disclosures can help investors judge whether the reported values are realistic.

Updated October 18, 2026. For general education only; not financial, tax or legal advice.

Browse the Glossary

Related Terms

Balance Sheet

A balance sheet is a financial statement that lists a company's assets, liabilities, and shareholders' equity at a specific point in time, showing what it owns and owes.

Depreciation

Depreciation is the accounting method of spreading the cost of a tangible, long-lived asset over the years it is expected to be used, recording a portion as an expense each year.

Income Statement

An income statement is a financial report that summarizes a company's revenues, expenses, and resulting profit or loss over a specific period, such as a quarter or year.

Capital Expenditure (CapEx)

Capital expenditure is money a company spends to buy, build, upgrade or maintain long-lived physical assets such as buildings, equipment and machinery, rather than for day-to-day operations.

Return on Assets (ROA)

Return on assets is a profitability ratio that shows how much net income a company generates for each dollar of its total assets.

Current Assets

Current assets are a company's cash and other assets that are expected to be converted into cash, sold, or used up within one year or within its normal operating cycle, whichever is longer.

Property, Plant, and Equipment (PP&E)

Property, plant, and equipment (PP&E) are a company's long-term tangible assets, such as land, buildings, and machinery, used in operations and recorded on the balance sheet at cost less accumulated depreciation.

Book Value

Book value is the net worth of a company as shown on its balance sheet, calculated as total assets minus total liabilities, often expressed on a per-share basis.