What is the difference between tangible and intangible assets?
Short Answer
Tangible assets are physical items like machinery, property, and inventory. Intangible assets are non-physical items like patents, brands, software, and customer relationships that often represent the majority of a company's value.
Full Explanation
Tangible assets have physical substance and include property, plant, and equipment (PP&E), inventory, and cash. They are depreciated over their useful life and are typically easy to value based on market prices or replacement cost. Intangible assets lack physical form but generate economic benefits — they include intellectual property (patents, copyrights), marketing assets (brands, domain names), technology (software, algorithms), customer-related assets (contracts, relationships), and human capital (assembled workforce, non-competes). Intangibles are amortised (if they have a finite life) or tested for impairment (if indefinite, like goodwill). The critical difference for modern businesses is scale: while tangible asset investment has remained relatively flat, intangible investment has grown dramatically. In the UK, business investment in intangible assets has exceeded tangible investment since the early 2000s. Companies that understand this shift and actively manage their intangible portfolio are better positioned for growth, fundraising, and exit.
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