Active Asset

What is an 'Active Asset'

An active asset is an asset that is used by a business in its daily or routine operations. Active assets can be tangible, such as buildings or equipment, or intangible, such as patents or copyrights. Active assets are listed as assets on the business's balance sheet.

Categorically, the essential point of differentiation for an asset is its revenue-generating capabilities. Those assets required to maintain standard operations while producing revenue are classified as active assets.

It's not uncommon to hear active assets called core assets.

BREAKING DOWN 'Active Asset'

Businesses depend on active assets in order to function on a daily basis. Active assets stand in contrast to passive assets, which may not be needed by the business at a given time in order to operate. Active assets should also not be confused with active asset allocation, which is a type of investment strategy.

Assets that are not central to the daily operations of a business can produce income, such as securities held in treasury, but these assets are not active, because they are not required to maintain business as usual.

Analysts and business managers monitor active assets to spot potential disruptions in operations. If certain assets which are usually vital to standard day-to-day business operations are widely fluctuating, it could signal a deterioration in financial or operational performance. Today, active assets are standard elements to enterprise risk management methodologies.

The level and nature of active assets performance will change with different industries or even with specific businesses who employ different operating procedures but are from the same industry. For instance, two businesses selling similar merchandise online may use vastly different inventory sourcing practices in an effort to get an edge on working capital management. Here, one business may run an aggressive inventory policy while another uses a more conservative style by keeping plenty of product on hand. There is no right or wrong way per se; maintaining active asset levels is one piece of a larger management strategy.

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