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.
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.
