Assets

By Entrepreneur Staff

Assets Definition:

The value of any tangible property and property rights owned by a company less any reserves set aside for depreciation. Assets don't reflect any appreciation in value unless they're sold for the greater value.

Profits aren't the only way to measure a company's success. You should also be aware of how much your company is worth. One way to do this is to examine your company's most updated balance sheet. That figure at the bottom for net worth, representing assets minus liabilities, is a good indicator of whether you've built value in your business--and if you have, how much.

Don't stop your valuation checkup with your balance sheet, though. There are a few other ways to measure value. One of the most important valuation techniques is based on expected future cash flow, or how much cash your company should be able to throw off for you or another owner in the next several years. Businesses are typically valued as a multiple of their future cash flows, but different industries and types and sizes of businesses use a variety of indicators. To find out what rule applies to your industry, check with your trade association

More From Financial Management

Cash Float Accounts

A bank account specifically set up by a business owner to float money through from Business A to enhance the perceived value of Business B

Cost-Benefit Analysis

A process by which you weigh expected costs against expected benefits to determine the best (or most profitable) course of action

Assets

The value of any tangible property and property rights owned by a company less any reserves set aside for depreciation. Assets don't reflect any appreciation in value unless they're sold for the greater value.

Debt-to-Equity Ratio

A measure of the extent to which a firm's capital is provided by owners or lenders, calculated by dividing debt by equity. Also, a measure of a company's ability to repay its obligations. If ratios are increasing--more debt in relation to equity--the company is being financed by creditors rather than by internal positive cash flow which may be a dangerous trend.