Chapter 4

Operational Assets

Introduction

Operational assets are long-term assets used by a business in providing goods or services to customers. Operational assets do not include inventory or investments. The function of the asset determines its appropriate balance sheet classification. For example, land upon which a firm’s factory is built constitutes an operational asset. However, land held for speculation is considered an investment, and land held for sale by a real estate developer is appropriately classified as inventory. Operational assets fall within three categories: 1) property, plant, and equipment (PP&E), 2) intangibles, and 3) natural resources. PP&E includes land, land improvements (e.g., parking lots, roadways), buildings, machinery, ...

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