Tangible: Perceived by Touch

August 31, 2024 3 min read Philosophy Economics Perception Physical Presence Touch

Tangible refers to anything that can be perceived by touch. It encompasses objects or materials that have a physical presence and can be observed and measured.

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Definition of Tangible

“Tangible” refers to anything that can be perceived by touch. It encompasses objects or materials that have a physical presence and can be observed and measured. In broader contexts, it also implies aspects that can be quantified or clearly measured.

Types of Tangibles

Physical Tangibles

Physical tangibles are objects and materials that have a definite shape and form and can be touched, such as furniture, buildings, vehicles, and machinery.

Tangible Assets in Economics

In the realm of economics and finance, tangible assets refer to physical assets like real estate, inventory, and machinery that a company can utilize in the production of goods and services.

Special Considerations

Tangibility in Accounting

In accounting terms, tangible assets are capitalized, meaning their cost is spread over the useful life of the asset. Example: A company purchases a piece of machinery for $100,000. This cost is capitalized and depreciated over its useful life.

Tangibility vs. Intangibility

Tangible: Assets like equipment, buildings
Intangible: Assets like patents, trademarks, and goodwill

Examples of Tangibles

Everyday Tangibles

Furniture: Such as tables, chairs, and sofas.
Buildings: Includes homes, offices, and factories.
Vehicles: Cars, trucks, and bicycles.

Tangible Assets in Business

Inventory: Goods held for sale.
Property, Plant, and Equipment (PP&E): Long-term assets used in the production of goods and services.

Historical Context of Tangibles

Evolution of Tangible Assets

Historically, tangible assets have been the cornerstone of business value. From ancient cultures that accumulated gold and land to modern industries that rely on sophisticated machinery, tangibles have always been integral to economic development.

Applicability of Tangibles

Importance in Valuation

Tangible assets play a crucial role in the valuation of companies, being direct indicators of economic health and productive capacity. Investors and stakeholders often look at a company’s tangible assets to determine the company’s strength and stability.

Comparisons

Tangible vs. Intangible Assets: Unlike intangible assets, which see their value derived from non-physical properties (e.g., brands, patents), tangible assets are easily measurable and concrete.

Intangible: Assets or properties that lack physical substance.
Depreciation: The reduction in the value of tangible assets over time.
Amortization: The process of reducing the value of intangible assets over time.

FAQs

What are common tangible assets in a business?

Common tangible assets include buildings, machinery, vehicles, and inventory.

How do tangible assets affect business valuation?

Tangible assets contribute to the book value of a company and provide collateral that can be used to secure loans, impacting overall business valuation.

Can intangible assets become tangible?

While intangible assets themselves don’t become tangible, they can lead to the creation of tangible assets (e.g., intellectual property leading to the production of a new product).

How is the depreciation of tangible assets calculated?

Depreciation is often calculated using methods such as straight-line or declining balance, depending on the expected useful life of the asset.

References

Smith, J., & Brown, R. (2022). Principles of Accounting. Accounting Press.
Johnson, L. (2021). Economic Fundamentals. Finance University Press.

Summary

Tangible refers to items or assets that can be perceived and measured by touch. From physical objects like furniture and vehicles to business assets like machinery and inventory, tangibles play an essential role in both personal and economic realms. Understanding tangible items’ nature and their impact on valuation and industry practices is crucial for multiple disciplines, including economics, accounting, and everyday life.