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What are Hard Assets?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 07 November 2016
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Hard assets are any tangible or physical items that are of worth and are owned by a business or individual. The term can also be used to refer to types of currency that are considered reliable in terms of their worth, and tend to serve as standards in the establishment of foreign exchange rates. In most cases, a hard asset is any valuable item that can be used to manufacture goods, provide services, or to purchase various types of products.

One of the most common examples of hard assets is real estate. Buildings of any type, ranging from office buildings to manufacturing plants to residential dwellings are all tangible assets that either make production possible or provide an ongoing service. Like many hard assets, real estate can be bought or sold at a profit, which only tends to increase its intrinsic value.

Equipment also falls into the category of hard assets. This includes machinery used in production facilities, or any type of electronic equipment that is essential in the operation of a business office. Because equipment provides the means of producing the goods or services sold by a business, assets of this type are essential to the ongoing operation, and thus are considered to be valuable. Some forms of equipment, such as manufacturing machinery, tend to hold a steady book value over the years, which only adds to its intrinsic worth.

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Cash is another type of hard asset. Currency of all kinds can be used to purchase goods or services, thus providing satisfaction to buyers, as well as allowing sellers to continue producing goods and services over the long-term. When it comes to foreign exchange of currency, such as in a currency trading situation, investors often look toward specific currencies as the foundation for the trading activity. This is because certain currencies are considered highly reliable in the market place. Two examples of currency that are considered hard assets in a foreign exchange situation are the Euro and the United States dollar.

The possession of hard assets is particularly important when determining the intrinsic value of a company. This is because assets of this type can easily be used to generate the funds necessary to settle debt if necessary. In addition, if a business owns enough hard assets to maintain operations, the company is considered to be in a more stable position than a business that leases equipment essential to its ongoing function.

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MrMoody
Post 8

@Mammmood - I worked in the telecommunications industry, and I can tell you that our communications network was the most important part of our capital assets.

As a matter of fact, when the company started doing poorly, we looked into selling off our assets to bring in some cash. We had miles and miles of dark (unlit) fiber, and so we sold it off to other telecom companies looking to buy fiber at dirt cheap prices.

It was one of the things that helped to keep us afloat, at least for some time.

Mammmood
Post 7

I work for a software company. I certainly wouldn’t classify the software that we sell as a hard asset, but it is an asset nonetheless; it’s the lifeblood of the business. Without it, we have no revenue.

We also run a cash-only business operation. This basically means that we have almost no loans on the business. It’s completely financed by ongoing revenue generated from software sales.

Now we do own a building, for which we took out a loan, so I suppose you could call that a hard asset. But that’s not the part of the business that really counts in my opinion. We could just as easily operate out of a garage and make money.

It’s the software that counts. I guess the computers on which the software is installed are the only really hard assets, but in the final analysis our best assets are our people.

John57
Post 6

@Oceana - I know that some small business owners don't have a credit card machine because of the fees that are generated each time they get used.

I think they are shooting themselves in the foot by not owning this hard asset. Sure, they may have to pay some fees, but that is better than no sale at all.

Losing out on business because you don't have a credit card machine seems to be a hard way to have a successful business.

Even though cash is considered a hard asset, most people don't carry much with them anymore and rely on credit or debit cards for their purchases.

golf07
Post 5

Most people have more hard assets than what they realize. If you have ever had to replace items in your home due to a fire or theft, you realize just how much value you have in your hard assets.

This happened to some friends of mine who lost their barn due to a fire. She is an artist and many of her supplies and tools she uses for her work were stored in the barn.

When she had to come up with a list of everything in there that was related to her work, she was surprised at the total value of all of it.

Oceana
Post 4

@cloudel – Since cash would be considered a hard asset because it allows business transactions to occur, I would think that cash registers would definitely be considered hard assets. Without a drawer to hold the cash and a calculator to determine the total of purchases, it would be pretty hard to do business.

A credit card machine is an excellent hard asset. I have tried to purchase things from stores that did not have a credit card machine before, and I just had to give the items back and walk away. People just don't carry cash as much as they used to, and businesses will miss out on a ton of sales if they don't keep current.

cloudel
Post 3

My friends own a party supply business, and I am trying to think of what would be considered their hard assets. They rent the building that houses the store, so that would not be one of them.

Would things like cash registers and credit card machines be considered hard assets for a store? I'm pretty sure that they actually own these, and they make transactions possible, so I'm assuming they would be.

They also own the computer on which they keep track of all of their inventory. They use this computer to keep themselves informed about when to reorder items.

orangey03
Post 2

@wavy58 – This is very true. At first thought, those of us who work at home may not consider that we have any hard assets, but all of the things you listed definitely fall into that category.

I make and alter clothing for a living from the comfort of my home. My sewing machine is one of my biggest hard assets. It helps me produce work efficiently so that I can keep new work coming in and paying the bills for me.

I also have a loom for weaving and a screen for printing t-shirts. These are two more hard assets that keep me in business. The demand for t-shirts is much higher than the need for homemade dresses these days.

wavy58
Post 1

I work from home doing freelance writing, so I guess my hard asset would be my computer. It allows me to produce the work that I get paid for doing.

I suppose another hard asset would be the CD holding the program that I use to type up my documents. The printer would not really be a hard asset, because my work is delivered electronically.

However, my internet receiver definitely would be one of my biggest hard assets. Without it, my work would not be possible. Such a little object provides me with the ability to earn a living.

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