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Tangible and Intangible Assets

Not all assets are physical and can be touched.


Tangible means perceptible by touch and has physical presence. A tangible asset is a type of asset that is real and can be sold off in exchange of money. For instance, tangible assets include factory, lorries, machines and equipments. In case of bankruptcy, tangible assets of a company could be sold off in exchange of money to repay debt holder / shareholder.

Example of tangible assets.


Meanwhile, intangibles book value refers to the assets of a company which are abstract and has no physical presence.
Example of intangible assets.
Intangibles assets include company goodwill, value of a brand, intellectual property and patent. Nike, for example, due to its renowned brand is able to sell its products at a higher price. However, the value of brand is an intangible asset that could not be grasped. In case of liquidity, the intangible assets could not be sold off in exchange of money to repay shareholders.

It is important to separate these two types of assets in business perspective due to the fact that one could be sold and one could not. They could be separated by the equation below:
Tangibles book value = Total book value – Intangibles book value

Tangibles book value is also one of the parameters used in calculating Price to Book Value.


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