Capital Assets are items that a company owns and can be used to generate income. Every capital asset will not automatically increase the value of a company, but they can be useful in increasing the value of a company if they are well managed. For example, if a company has a high worth of land, it is important that the land is well managed to increase the value of the land. Capital assets and their value should be maintained to increase the value of a company. By doing this, it will help to increase the value of a company and will also increase the net worth of a company.Capital assets are classified into two types:- current and fixed.I- Current capital assets refer to items that can be converted into cash in less than one year such as accounts receivables, inventory, money market securities and short-term investments.II- Fixed capital assets refer to items that can be converted into cash in more than one year like land, buildings, leasehold improvements and equipment.Current capital assets have a high liquidity value and can be converted into cash promptly. Fixed capital assets have a low liquidity value since they cannot be converted into cash quickly. They are assets that are used to generate revenue over a long period of time.There are two types of current capital assets:- current assets, and working capital. They are categorized as current since they can be converted into cash quickly.1- Current assets are usually cash, accounts receivable and inventory, while working capital is the difference between current assets and current liabilities.2- Working capital is a measure of the liquidity position of a business because it measures the ability of a business to meet its current liabilities with its current assets. If a company has a high amount of working capital, it means that the company can meet its short term obligations without any problems. If a company has a high amount of working capital, it should invest in fixed assets to increase its working capital. If a company has low working capital, it should pay off its short-term liabilities to increase its working capital.
