What is a fixed asset?

A fixed asset refers to tangible assets that a company uses over an extended period in its operations to generate revenue. These assets are not expected to be converted to cash within a year. Instead, they are long-term resources that are integral to the company’s operations, such as buildings, machinery, and vehicles. The key characteristic of a fixed asset is its longevity and usefulness in generating profits over several accounting periods, making it distinct from current assets that are liquidated within a year.

In this context, other options do not correctly define fixed assets. For instance, while tangible assets that can be sold within a year might refer to current assets, they do not capture the essence of fixed assets as long-term resources. Intangible assets, such as patents, are vital but fall outside the definition of fixed assets as they lack physical form. Lastly, the notion of assets primarily for generating liquidity does not align with the purpose of fixed assets, which is to support ongoing business activities rather than provide immediate cash. Thus, the definition of fixed assets as tangible assets used to generate profit over the long term is accurate and comprehensive.