As mentioned earlier long term assets are those assets that cannot be liquidated within a year. PPE (Plant, property and equipment), stocks, bonds and long term investments come under this. We all have a dream to have a house of our own. Mortgage usually eats up into all our earnings and we end up paying mortgage till we retire. So for salaried people besides owning a house, they should also look into other assets that will be a cushion for them post retirement. This is where long term assets come into play.
Long term assets might not provide you with cash immediately but over the years the turn out will be quite good.
However long term assets require huge amounts of cash to be put in at an early stage and not everyone can manage it. Also the factor of depreciation takes off a good size chunk of the profit. The growing trend is investment in long term investments such as pension schemes and also insurance. Moreover Computer programs, apps and other creative deals that result in royalty over a period of years is becoming the norm. Hence you can see so many apps for almost everything.
Investing in PPE is usually challenging for people with limited income. However for corporate and big businesses it’s an everyday matter. For expansion long term assets come in handy. Also when the company is need of funds, it sells of some of its PPE in order to meet the cash shortage.
There is tax benefit in your tangible and non tangible assets. Tax can be reduced through depreciation and amortization. This can be claimed through the IRS. So, invest wisely when planning to buy either a tangible or non tangible asset.