What role do fixed assets play in a business?

Fixed assets, also known as long-term assets, play a crucial role in a business as they are used to generate revenue through daily operations. These assets, which may include property, plant, equipment, and vehicles, are essential for the company to conduct its core business activities. Unlike current assets, which are expected to be converted into cash or consumed within a year, fixed assets serve the business over a longer period, contributing to the production of goods or services that ultimately lead to sales and profit.

Furthermore, the presence of fixed assets can provide a business with operational stability, as they are fundamental to how the business functions on a day-to-day basis. For instance, a manufacturing company relies on machinery to produce its products, while a retail business needs a physical store space to display and sell its merchandise. Therefore, fixed assets are integral to maintaining and enhancing the revenue-generating capabilities of the organization.